Prajna Capital - An Investment Guide

A company’s balance sheet is essentially a statement of its wealth ( assets ) and what it owes to others ( liabilities ) at a particular point in time. The assets could be fixed assets like land, buildings, plant and machinery. They could be movables like cars or computers. They could also be liquid assets in the form of cash reserves or receivable payments due to the company from those it has sold goods to, for instance, or repayments on loans given. Liabilities are anything the company has to pay to others. Thus, they would include payments due to its suppliers. Loans taken from others as well as interest due on those loans would also be part of the liabilities. What is owed to the shareholders would also fall in this category. However, balance sheets present this information not explicitly under the heads assets and liabilities, but rather as a statement that gives sources of funds on top and application of funds below. All sources of funds effectively constitute liabilities. Sha...