Chapter 6

Balancing Assets against Liabilities and Equity

In This Chapter

arrow Defining assets, liabilities, and equity

arrow Exploring the basics of balance sheets

arrow Reviewing assets

arrow Understanding liabilities

arrow Examining equity

Picture a tightrope walker carefully making her way across a tightrope. Now imagine that she's carrying plates of equal weight on both sides of a wobbling rod. What would happen if one of those plates were heavier than the other? You don't have to understand squat about physics to know that it isn't gonna be a pretty sight.

Just as a tightrope walker must be in balance, so must a company's financial position. If the assets aren't equal to the claims against those assets, then that company's financial position isn't in balance, and everything topples over. In this chapter, I introduce you to the balance sheet, which gives the financial report reader a snapshot of a company's financial position.

Understanding the Balance Equation

A company keeps track of its financial balance ...

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