Chapter 4
The Balance Sheet: Assets, Liabilities, and Equity
In This Chapter
Defining assets, liabilities, and equity
Exploring the basics of balance sheets
Reviewing assets
Understanding liabilities
Examining equity
Picture a tightrope walker carefully making her way across a tightrope. Now imagine that she’s carrying plates of equal weight on both sides of a wobbling rod. What would happen if one of those plates were heavier than the other? You don’t have to understand squat about physics to know that it wouldn’t be a pretty sight.
Just as a tightrope walker must be in balance, so must a company’s financial position. If the assets aren’t equal to the claims against those assets, then that company’s financial position isn’t in balance, and everything topples over. This chapter introduces you to the balance sheet, which gives the financial report reader a snapshot of a company’s financial position.
Understanding the Balance Equation
A company keeps track of its financial balance on ...
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