BALANCE SHEET explained

What is a balance sheet, and how can I read a balance sheet to learn more about the financial situation of a company? What do the various financial terms on the balance sheet mean, and how do I understand the full picture?

⏱️TIMESTAMPS⏱️
0:00 Introduction to the balance sheet
0:14 What is a balance sheet
1:04 Reading a balance sheet
1:52 Balance sheet example
2:43 Balance sheet categories
3:15 Assets on the balance sheet
6:16 Liabilities and equity on the balance sheet
8:21 Balance sheet analysis

The balance sheet is an overview what a company owns and what a company owes at a point in time. What is owned is on the left, what is owed is on the right. The #balancesheet is one of three very useful #financialstatements that a company puts together and publishes. The other two financial statements are the income statement, an overview of the profit or income that the company generates during a period, and the cash flow statement, an overview of how much cash the company generates, and where it spends that cash during a period. The balance sheet is a statement of the financial position at a point in time, so it’s like a picture. The income statement and cash flow statement both cover the flow during a certain period (usually a month, a quarter, or a year), so they are like a movie, each with its own focus.

Related financial statement tutorials:

When reading a balance sheet, it is important to start off by looking at the balance sheet by category. Current assets and non-current assets on the left. Current liabilities, non-current liabilities, and equity on the right. Current assets are cash and other assets that are expected to be converted to cash within a year. Non-current assets are longer-term investments that cannot be converted into cash quickly. Current liabilities are amounts due to be paid to creditors within twelve months. Non-current liabilities are amounts owed that are to be paid after the period of one year. Equity on the balance sheet is the book value of the shareholder capital.

That’s how the balance sheet works on a conceptual level. Let’s now look into the balance sheet of a real-world company: retail company Walmart. Walmart’s fiscal year runs from February through January, so we’ll be reviewing the year-end balance sheet of January 31st, 2020. Current assets $61.8 billion, non-current assets $174.7 billion, adding up to total assets of $236.5 billion. Current liabilities $77.8 billion, non-current liabilities $77.1 billion, equity $81.6 billion. And as the word balance sheet suggests, the total amount owned equals the total amount owed. Per the accounting equation: assets equal liabilities plus equity.

Let’s zoom into the balance sheet in more detail, and review what is in each of the balance sheet categories: current assets, non-current assets, current liabilities, non-current liabilities, and equity. Same five categories, just a lot more detail to dig into. In the American format of the balance sheet, assets are listed from most liquid to least liquid. Liabilities are listed from due first to due last. I will take you through the main line items.

The balance sheet: an overview of what a company owns and what a company owes at a point in time, which can tell very interesting stories about the financial situation of a company. If you have any questions about the balance sheet, then please post them in the comments below.

Philip de Vroe (The Finance Storyteller) aims to make accounting, finance and investing enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[emmaschlotter]

I'm in the first year of my master's degree and was very confused about a lot of things, I watched some of your videos. I'm so glad I found someone who can explain in such an easy way! Thank you for that :)

[shikharsingal]

Case study based approaches are the best. Real life example and analysis help. 👍🏼

[zuggrr]

Man you bring me sooo much value through these videos. Thank you!

[NandishPatelV]

I like the title of your channel! I also like the conceptual foundation you lay first and then the actual use of the concepts using examples. Thanks. :)) Keep Smiling

[TheJellyPlane]

Your channel is a godsend! Thank you very much!

[bro_FREE]

That’s for sharing and making this so simple. I took corporate accounting years ago and was looking for a refresher. This is very helpful

[tej_s]

Please do a longer video (about an hour long) on the same topic going into further detail on what to make of the different numbers and how to value a company.

[amalabdelaziz]

I am taking a business finance course and was very confused, but your video made everything clear, thank you so much!

[batoolhijjawi]

Thank you is not enough! .. I am in love with your content. <3
You have a new subscriber now!

[tainafelippe]

Excellent content, very useful and easy to understand, thank you :)

[monlivreetmoi]

Bravo I have done to watch all video for this session. It is very interesting. Thanks so much my Professor

[hamzaashfaque]

I love your videos. They're so clear and to the point. I've been looking into getting a bit of know how of how finance and money works and your videos have helped me a lot.

[tianruiouyang]

As a student. I really love to watch your video which has good quality content. I love to follow your youtube content with my studying and investing career.

[Gocool]

I always wanted to learn most of the finance terms... finally I found a right teacher!!! Way to

[the.dialogue]

Thank you mate. Better understanding than when I got here😂

[priscillaesther]

I now regret my decision of joining a $300 accounting course and ended up not following most of the lessons due to my full-time job when there exist channels like yours the whole time. Good thing is, there's no need for me to spend more $300 in the future!

[trickoflife]

very usefull thanks for your kindness sharing

[CrispyTM]

My schoolteacher is just so boring and after multiple lessons I still didn’t get this, but now after watching this video it’s finally more clear! Thanks! 👍🏼

[prettahmo]

I have an exam tomorrow about finance and investing and your explanations are really good and easy to understand! Thanks a lot! :)

[QualitativeInvestor]

If company have assets that is trades in open markets (stocks) how that frequently change price reflects on BALANCE SHEET?
As a price snapshot of each quarter report?
Does company obligated to mention those prices on any other reports for a public?