The balance sheet is essentially a financial statement that tells whoever is looking at it what a company owes and what is owns (this is of course in a summary format).
Why is this important? The balance sheet gives a company a tool that makes it possible to see where they stand overall. It shows how much cash is available as well as the amount of debt and liabilities, what's coming due "today" and what's coming due in the future. Having this information in this specific format can help to inform and speed up the decision making process.
What can you pull from this?
- Debt-to-Equity Ratio
- Acid-Test Ratio
- Operational Efficiency
- Working Capital
What to remember: This is a picture of one point in time and should be compared to both previous periods and other companies in the industry. In other words, don't look only at the balance sheet when making decisions.