Corporate Finance For Dummies, 2nd Edition

Chapter 4

Staying Balanced

IN THIS CHAPTER

Introducing what’s what on the balance sheet

Examining assets, liabilities, and owners’ equity

Understanding how you can use the balance sheet

For every give, there is a take. For every expenditure or liability, there is an asset of equivalent value. All of business finance must be in balance, and this is reflected nowhere better than on the balance sheet. The balance sheet is a financial report that’s useful to anyone who has even the slightest interest in a business, including management, investors, lenders, business students, union representatives, and all other stakeholders. In short, the balance sheet includes important stuff, so pay attention to this chapter!

Introducing the Balance Sheet

The Securities and Exchange Commission (SEC) requires that all corporations maintain a balance sheet and highly recommends that any business keep one (the distinction being that corporations are publicly-owned companies that are legally required to fulfill these reporting obligations to its shareholders and other regulators).

After all, the SEC’s main purpose is to illustrate the exact value of a company in the very moment that the data are collected. ...