The balance sheet is the most important financial statement for understanding a company's financial health. It shows, at a specific date, everything the company owns (assets) and everything it owes or has financed (liabilities and equity). It is a complete snapshot of the business, showing where resources come from and where they have been invested. Assets show the company's goods, rights and available funds, while liabilities and equity show how they have been financed: with own funds or with debt. Analysing the balance sheet lets you assess whether the structure is balanced, whether there is enough liquidity to operate, whether the level of debt is reasonable and whether the company has a solid base for long-term growth.

• It does not measure the profit or loss for the period (that is shown in the income statement).
• It does not explain cash movements or cash generation (that is the job of the cash flow statement).

• Current assets above current liabilities indicate short-term balance and the ability to meet immediate payments.
• An adequate level of equity reflects stability, autonomy and less dependence on external financing.
• Too much short-term debt or weak equity can signal a risk of financial strain or a lack of structural solvency.