Balance Sheet- Importance in Business & Investing

Do you know why the balance sheet is one of the key financial statements that Investors and lenders look at the most?

Most entrepreneurs focus on the income statement/P&L as this show the profit or loss a business in making, but in reality, the balance sheet indicates the financial strength of a company and is the report that investors and bankers spend a considerable time analysing.

Well, this is because the balance sheet shows the financial health of a business at a point in time and by analysing the numbers, investors can determine how well you have been running your affairs up to that particular point in time.

Managing a balance sheet requires a deeper understanding of finance than manging an income statement – primarily as you have to know how changes in the balance sheet impacts the other financial statements and vice versa.   

As complex as this may sound, there are really three main parts.

Assets = Liabilities + Capital/ owners’ equity 

On this 4th Episode of my Podcast, i explain The Balance Sheet and its importance to business health, wealth and investing.

I talk about the key aspects of the balance sheet, keeping it very basic for now but will talk about some of the complexities in the future.

I also plan to cover the other financial statements, asset protection and much more in the upcoming episodes.

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