While getting an MBA certainly isn’t for everyone, I loved it. Even though I voraciously read the business books du jour, for me nothing compared with exchanging notes, learning from amazing professors, and conversing with others who are navigating creative business challenges.
It’s been a while since I was in the classroom – and like with anything you’re trying to master – it never hurts to revisit the concepts and dust off the notes. (Or in my case, revisiting again and again and again.) So, I’m starting with some finance and accounting basics today: The Balance Sheet.
One of my favorite catch-all talks on this is Bill Ackman’s “Everything You Need to Know About Finance and Investing in Under an Hour.” Worth watching IMO.
#MBArefresh – Balance Sheet Basics
Although I’ve certainly forgotten a lot of material from those classes, I’ve reviewed this equation so many times that I think it’s indelibly etched in the corner of my brain reserved for finance and accounting.
- Assets = Liabilities + Stockholders’ Equity
“A balance sheet is a snapshot of a business’s financial condition at a specific moment in time… A balance sheet comprises assets, liabilities, and owners’ or stockholders’ equity. Assets and liabilities are divided into short- and long-term obligations including cash accounts such as checking, money market, or government securities. At any given time, assets must equal liabilities plus owners’ equity. An asset is anything the business owns that has monetary value. Liabilities are the claims of creditors against the assets of the business.” Source: INC.com
“The balance sheet represents one date in time. The figures represent balances, and since the balances change daily, a balance sheet only represents one point in time. This contrasts with an income statement, which covers a period of time and has a “from” date and a “to” date, such as one month or a year. This is important to know when evaluating balance sheets.” Source: QuickBooks
“A Balance Sheet is a statement of the financial position of a business which states the assets, liabilities, and owners’ equity at a particular point in time. In other words, the balance sheet illustrates your business’s net worth.” Source: TheBalance.com