January 22, 2021 11 minutes to read ∙ 2500 words

What to Look for on the Balance Sheet Especially in Troubled Times

By Robert B. Dickie, Peter R. Russo, and Raymond P. Wilson

Reprinted with permission from Business Law Today, January 2021. ©2021 by the American Bar Association. All rights reserved. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

There are three main financial statements—namely, the balance sheet, the income statement, and the cash flow statement. This article will discuss the balance sheet, also known as the statement of financial position. The balance sheet is a “snapshot” of a company’s position at a particular point in time. The report takes a simple approach: at any given moment, what you own (assets) less what you owe (liabilities) is what you are “worth” (shareholders’ equity). It’s important to note that “worth” for financial reporting purposes is very different from the market value of the company. Here, we simply mean worth from a reporting perspective.

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