A balance sheet is a financial statement that reports a company’s assets, liabilities, and equity at a specific point in time. It is used to provide a snapshot of the company’s financial position and is often prepared at the end of an accounting period, such as the end of a month or a year.
Assets are resources that a company owns or controls, such as cash, accounts receivable, inventory, investments, and property, plant, and equipment. Liabilities are obligations that a company owes to others, such as loans, taxes, and accounts payable. Equity represents the residual interest in the assets of the company after liabilities are subtracted. It includes capital contributed by the owners and retained earnings, which are the profits that the company has earned and retained over time.
The balance sheet is organized into two main sections: the assets section and the liabilities and equity section. The assets section lists all the company’s assets in order of their liquidity, or how quickly they can be converted into cash. The liabilities and equity section lists the company’s liabilities in order of their maturity, or when they are due.
Your banker may be asking for a copy of your balance sheet for several reasons. They may want to review your financial position to assess your creditworthiness or to determine the level of risk involved in lending you money. They may also be interested in your company’s liquidity, profitability, and solvency, which are all important indicators of financial health. Alternatively, they may be required to obtain a copy of your balance sheet as part of their due diligence process when considering your loan application. In any case, the balance sheet is an important tool for understanding the financial position of your company and for making informed business decisions.