How to Read a Balance Sheet

Learn How to Read a Balance Sheet With These Lessons

Balance Sheet from The Coca-Cola Company

Joshua Kennon/Getty Images

A balance sheet is a snapshot of a business that shows its assets (what is has), its liabilities (what it owes), and what value is left over (the equity). Balance sheet analysis is a core part of understanding the potential value of your stock market investments or in managing your capital as a business or an individual. In both cases, you have to know what assets a company has and what debts it owes. You'll want to know what the capital structure looks like and how much tangible capital is required relative to owner earnings—all information that can be found on the company's balance sheet if you know what you're looking for.

If you have little or no understanding of balance sheets, these lessons can help. You'll know what you're seeing when you pick up a company's stock report. Grab a cup of coffee, get comfortable, and settle in for a long read. What you're about to study can change your life and it's worth the effort.

Learn Balance Sheet Analysis 

This table of contents provides direct links to each numerous lessons designed to help you understand balance sheet analysis. You can use it as a central reference, coming back to it after you've read each link, or you can simply follow the footer navigation paths laid out at the bottom of each page to take you through the content sequentially.

All in all, you'll learn what a balance sheet is, why it's so vital to stakeholders, what the different sections represent, some financial ratios you can calculate using the balance sheet data, how to get your hands on the balance sheet of a company in which you want to invest, and much more. Each is meant to be read in conjunction with its sister investing lesson on income statement analysis.  

This might seem like a lot of information at first glance, but it's organized sequentially to be less overwhelming. It's vitally necessary for anyone with little to no background in finance, investing, or business to understand these components. The balance sheet is a key tool in learning to manage your overall risk, to achieving your financial dreams, and to avoid mistakes that can set you back in attaining your goals. When used as part of a larger quantitative analysis, understanding a balance sheet can help reduce the chances of making a foolish investment that can destroy your wealth.  

Table of Contents