What are the 3 main things found on a balance sheet?

The three main components of a balance sheet are assets, liabilities, and shareholders' equity. However, there are numerous subcategories of information within each of those. For example, the assets category contains information about the company's cash and property, and liabilities include the company's various debt obligations.

How do you calculate a balance sheet?

The central equation used in balance sheets is assets minus liabilities equals shareholder equity.

What is the difference between a balance sheet and a financial statement?

A balance sheet is one of three main financial statements publicly traded companies are required to issue regularly. The others are the income statement and the cash-flow statement.

What is the balance sheet also known as?

The balance sheet is also known as the "statement of financial position," since it provides a snapshot of a business' financial state at a specific point in time.

Balance Sheet: How to Read, Components, and Example

Let's demystify one of the most important documents investors should be aware of.

By Matthew Frankel, CFP – Updated Jul 7, 2025 at 12:47 PM EST

Key Points

Balance sheets consist of assets, liabilities, and shareholders' equity, revealing financial health.
Shareholders' equity equals assets minus liabilities and reflects theoretical investor value if a firm closes.
Analyzing balance sheets helps investors gauge a company's financial flexibility and investment potential.

Every publicly traded company issues a series of financial statements on at least a quarterly basis. The balance sheet is perhaps the statement most indicative of a company's financial health.

A company's balance sheet contains important information about how much money the company has, how much it owes, and more. In this article, we'll discuss the basics of balance sheets, how they work, what to focus on as an investor, and a real-world example.

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Balance sheet with a fountain pen and glasses lying on top. — Image source: Getty Images.

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Balance sheets are important for investors to read because they can answer some very important questions about a company's financial health and flexibility. By knowing how to read a company's balance sheet, you can find the answers to questions such as:

How much cash does the company have available to make acquisitions or invest in growth?
How much tangible property, such as factories and machinery, does the company own?
How much debt does the company have?
What is the company's actual book value?

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An infographic explaining the balance sheet formula: Shareholder equity equals assets minus liabilities. — Image source: The Motley Fool.

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Asset

An asset is a resource used to hold or create economic value.

Noncurrent assets include things that won't be readily spendable within the next year. Tangible property, such as a factory, is the most obvious example. However, they also include equipment, long-term investments, and intellectual property.

Liabilities: Most notably, the liabilities category includes a company's debts. Like assets, liabilities are separated into current liabilities (those due within a year) and noncurrent liabilities. Debts coming due soon and accounts payable are examples of current liabilities you'll typically find on a balance sheet, while long-term debt is the most common type of noncurrent liability.

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Liability

When it comes to evaluating a business, a liability is really just a one-word description of what a company owes to other parties.

Shareholders' equity: Subtracting the company's liabilities from its assets shows its shareholders' equity. The metric itself is most useful when evaluating value investments, as opposed to growth stocks, because it shows what a business is "worth" based simply on what it owns and owes without regard to its income-generating or growth potential.

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Statement of Shareholders’ Equity

A summary of changes in a company's ownership interests, including stock issuance and earnings.

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Apple fiscal year 2023 balance sheet. — Image source: Apple.

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Assets

Let's start with the assets section. When you hear that a company "has a lot of cash," it typically isn't actually holding all of it in cash. The "cash and equivalents" category on the balance sheet contains actual cash, as well as instruments like money market accounts.

However, the current and noncurrent assets categories also include "marketable securities" categories. These contain things such as Treasury securities, bond investments, and stocks.

The key point is that these can typically be readily converted into cash the company can use. So, while Apple has roughly $30 billion in actual cash and equivalents, this figure swells to more than $162 billion when considering marketable securities.

Second, it's important to realize that aside from cash and marketable securities, other values listed in the assets section aren't set in stone. For example, there's no guarantee Apple could sell its property, plant, and equipment holdings for the $43.7 billion listed.

The $6.33 billion in inventory listed assumes it will all sell for full price, and the $29.5 billion in accounts receivable assumes 100% of Apple's customers will pay their bills. And "other assets" is the vaguest of all, typically including the value of things such as patents, goodwill, and other difficult-to-value items. With that in mind, we can see that Apple has a total of about $352.6 billion in assets on its balance sheet.

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Liabilities

The biggest liability on Apple's balance sheet is its long-term debt, which stands at about $95.3 billion. It also has a smaller amount of short-term debt plus about $63 billion in accounts payable (e.g., to its part suppliers). Although Apple has almost $109 billion in current and noncurrent "other" liabilities -- certainly a lot of money -- the key point is that this is a very broad category.

On the current side, this can include things like payroll obligations, accrued benefits, and other items due within a year. On the noncurrent side, liabilities can include lease obligations, deferred tax credits, customer deposits, and pension obligations, to name just a few. In all, Apple has about $290.4 billion in liabilities reported on its balance sheet.

Shareholders' equity

When we subtract Apple's liabilities from its assets, we see that its shareholders' equity is about $62.1 billion. As noted, think of this as the amount of money that would theoretically be left if Apple decided to cease business operations, sell everything it owns, and pay off its debts.

This is not a measure of how much the business is worth. Apple is a highly profitable and efficient business growing rather quickly, even with its large size. In fact, Apple's market value is currently about $2.7 trillion -- about 43 times its shareholders' equity or book value.

Again, shareholders' equity is most useful when evaluating value stocks and comparing stocks' valuations in similar industries. For example, the price-to-book (P/B) ratio is especially useful when evaluating bank stocks since other common valuation metrics (like the price-to-earnings ratio) aren't always a great fit.

Balance sheet FAQs

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelCFP

Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

How to Read a Balance Sheet

Let's demystify one of the most important documents investors should be aware of.

Key Points

Asset

Liability