Balance sheet

A balance sheet can be analogized to the inventory of a sports team, such as the Boston Red Sox. Just as a sports team has a list of all the players it has under contract, a balance sheet is a list of a company's assets, liabilities, and equity. A balance sheet provides a snapshot of a company's financial position at a specific moment in time. Just as the roster of a sports team can change from game to game, the items listed on a company's balance sheet can change from day to day. The assets of a company are like the players on a sports team. They include things like cash, accounts receivable, inventory, and equipment. Just as a sports team can use its players to win games, a company can use its assets to generate income.

The liabilities of a company are like the debts owed by the sports team. They include things like loans, accounts payable, and taxes owed. Just as a sports team has to pay its debts to remain in good financial standing, a company must pay its liabilities to remain financially healthy. Finally, the equity of a company is like the value of the sports team. It includes things like stock and retained earnings. Just as the value of a sports team can increase or decrease based on its performance, the equity of a company can increase or decrease based on its financial performance. In short, a balance sheet is a snapshot of a company's financial position that lists its assets, liabilities, and equity. Just as the roster of a sports team provides information about the players on the team, a balance sheet provides information about a company's financial position.