A balance sheet is a financial statement that provides a snapshot of an organization's financial position at a specific point in time. It is a key part of the annual financial report and consists of two main components: assets and liabilities (including equity). The balance sheet shows what a company owns and how these assets are financed, whether through equity or debt. Together with the profit and loss statement, the balance sheet forms the financial report of your organization.
A balance sheet consists of the following components:
The balance sheet provides a clear overview of what a company owns and the debts it has, helping to assess financial stability. Company leadership and investors use the balance sheet to make important financial decisions, such as investments, expansions, or loan applications.
By understanding the ratio between equity and debt, an organization can better assess its vulnerability to financial risks, and thus evaluate how financially healthy your organization is.
For many businesses and other organizations, it is mandatory to prepare and publish a balance sheet with the Chamber of Commerce.
In short, the balance sheet is a crucial tool for both internal and external stakeholders to assess the financial health of your organization.
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