Balancing act
Balance sheets are the paper tigers of financial reporting. They are as easy to understand as the profit and loss account – perhaps easier – but they are widely feared and misunderstood. Do not worry. If you have made it this far, there is nothing to fear in this chapter. The balance sheet is a snapshot of the net wealth of an entity – showing (in summary) everything it owns and owes. This tells you a great deal about past performance and the potential for the future.
This chapter describes the balance sheet, what it is, how it is structured, what it shows, how to interpret it and how to project your own.
Flows and snapshots
You will recall from the previous chapter that a profit and loss account (P&L) shows flows over time. You ...
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