How to read a balance sheet and a company’s finances

While a company’s income statement presents the latest results of a company’s operations, other financial statements can present how a company is performing using other factors. The balance sheet, for example, depicts the financial strength (or weakness) of a company.

So what’s in a balance sheet?

A company’s balance sheet has three main sections:

  • Assets: Items of economic value that are owned by a company.
  • Liabilities: A company’s financial obligations.
  • Equity: Sometimes referred to as shareholders’ equity, this represents the net accounting value of the company.