From the course: Finance for Non-Financial Managers
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What to look for in a balance sheet
From the course: Finance for Non-Financial Managers
What to look for in a balance sheet
- Let's talk about the balance sheet in a little bit more detail. The balance sheet is built around one of the most awesome creations of the human mind, the accounting equation. Assets equal liabilities plus equity. The great insight behind the accounting equation is this. Every time we get an asset, let's write down where we got the money to buy that asset. So we've got the two sides of the accounting equation. The first side, the asset side, that's the real world. You can go touch a company's assets, it's cash, it's buildings, it's land. That's the real part of a company. The other half of the accounting equation just says where you got the money to buy those assets. So what are assets? A formal definition is that assets are resources owned or controlled by a company that will provide probable future benefit. Let's take a simple example, the balance sheet of Walmart. As of January 31st, 2023, the balance sheet of Walmart says that the company has nine billion dollars in cash. Is…
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