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The Balance Sheet…the 2nd of 3 Financial Statements


The Balance Sheet…the 2nd of 3 Financial Statements


Do you know what a Balance Sheet is?

Most CEOs that I work with don’t...


After all...


isn't cash flow what's most important?


Or profitability?


Actually, if you were to ask me... it's the most important of the 3 statements


Why?


Because a Balance Sheet is the one statement that gives you visibility into ALL 3 statements


OK...first, let's define what a Balance Sheet is


A Balance Sheet tells you:

➡ How much the company OWNS or substantially CONTROL..IE anything of economic value (Assets)


➡ What the company OWES (Liabilities)

➡ And how the company has been FUNDED (equity)



To put extra correctly, Liabilities and Equity BOTH show you how a company has been funded, but liabilities are CAPPED, while equity is UNCAPPED


So how does a Balance Sheet tell you about profitability?


Or Cash flows?


You can learn the profitability of a business by understanding the NET CHANGE in RETAINED EARNINGS / NET INCOME on your Balance Sheet


If those 2 numbers are growing...the company has been posting a positive net income! 🤑🤑🤑


..and you can learn about where CASH is going by taking the difference in all other Balance Sheet accounts (roughly)


So as you can see - the Balance Sheet gives you the most information!

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