The balance sheet is a comparison of a company's total assets (assets) with the sum of equity and liabilities as of the reporting date.
The assets side of the balance sheet thus shows in which assets a company has invested, while the liabilities side shows the origin of the funds used to finance these assets.
The balance sheet is a central instrument of company evaluation and provides an overview of the company's asset and financial situation. A balanced structure of assets and liabilities is crucial for the long-term stability and economic success of the company.
The balance sheet is often used in conjunction with the profit and loss account (P&L) to comprehensively assess the financial situation of a company. While the balance sheet provides an overview of the asset situation, the P&L shows the earnings situation and provides information on how successfully a company has performed in the current business year.
In summary, the balance sheet is a reporting date-related comparison of a company's assets and the origin of its capital and is thus an important instrument for company valuation.
