Financial Health

Although the balance sheet is not used nearly as much as the profit and loss statement by business owners and CEOs, it should be. It defines the financial health of the firm and properly understanding it will empower the managers to improve the financial health of the company.

Although the balance sheet is not used nearly as much as the profit and loss statement by business owners and CEOs, it should be. It defines the financial health of the firm and properly understanding it will empower the managers to improve the financial health of the company.

This class begins with a description of the basic balance sheet formula – assets equal liabilities plus shareholder equity. We define current, fixed and long-term assets and liabilities and discuss how to know what goes where on the balance sheet. We discuss the equity accounts and common challenges with ensuring the balance sheet is accurate every month.

With this understanding, we conclude this class with a definition of and discussion around the key financial ratios derived from the profit and loss statement and balance sheet of the company.