Balance Sheet

One of the main components of a company's report and accounts, the balance sheet provides a snapshot of everything the company owes and owns at the end of the financial year in question. On a specific date it lists: tangible assets, intangible assets, stock, debtors, cash, bank creditors, trade creditors, share capital and reserves. The profit and loss account tells you how the company has performed in the previous year, while the balance sheet is more revealing about its fundamental health, indicating whether it can pay its debts and how good its cash management is. A 'strong' balance sheet is one where liabilities (including borrowings) are considerably outweighed by assets (including cash). If a company is having problems, the balance sheet (together with the cash flow statement) will tell you whether it can stand the strain.