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 the liabilities category includes 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 the three main financial statements that 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's 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 May 6, 2026 at 2:16 PM EST

Key Points

Balance sheets show a company's assets, liabilities, and shareholders' equity.
Understanding balance sheets aids investors in assessing a company's financial health.
Assets minus liabilities equals shareholders' equity, indicating company value.

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 its assets, liabilities, and equity. In other words, how much it owns, how much it owes, and the difference between these two amounts. 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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How balance sheets work

A balance sheet is a financial statement that shows a business's current financial state and calculates the book value, or investors' equity, in the company. A balance sheet has three main components: assets, liabilities, and shareholders' equity. In the next section, we'll get into what information each one includes.

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Balance sheets are important for investors to read because they can answer key 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?
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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The balance sheet formula

Although a balance sheet itself can be quite complex and difficult to understand for many investors, the central concept is rather simple:

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So, assets minus liabilities equals shareholders' equity. Also known as a company's book value, shareholders' equity is the theoretical amount investors would have if a company closed its doors, sold its assets, and paid its debts.

Obviously, a successful company would be unlikely to do that. But this idea is similar to how home equity works. The difference between your home's value (asset) and what you owe on it (liability) is your equity.

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Elements of a balance sheet

As previously mentioned, a balance sheet has three main parts: assets, liabilities, and shareholders' equity. Let's take these one at a time.

Assets: The short explanation is that assets include everything a company owns. Assets are typically broken down into current and non-current assets. Current assets include liquid assets, such as cash and short-term investments. They also include assets expected to become liquid within a year, such as inventory and accounts receivable.

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Asset

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

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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.

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Shareholders' equity: Subtracting the company's liabilities from its assets shows its shareholders' equity. The metric is most useful for evaluating value investments, rather than growth stocks, because it shows what a business is "worth" based solely 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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It's also worth noting that shareholders' equity and a company's market capitalization (the market value of its stock) are often very different. That is especially true if a company can generate high returns on its assets or it's growing rapidly.

Example of a balance sheet

Let's look at a real-world balance sheet and how to read it. Here's Apple's (AAPL +4.01%) balance sheet as things stood on March 28, 2026:

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Apple balance sheet, Q2 2026. — undefined

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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 includes cash and instruments such as money market accounts.

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

The key point is that these can typically be readily converted into cash that the company can use. So, while Apple has roughly $45.6 billion in cash and equivalents, this figure rises to more than $146 billion when marketable securities are included.

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 $50.1 billion listed.

The $6.75 billion in inventory listed assumes it will all sell for full price, and the $30.3 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 about $371 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 $56 billion. It also has a smaller amount of short-term debt plus about $57 billion in accounts payable (e.g., to its part suppliers). Although Apple has approximately $113 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, among others. In all, Apple has about $265 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 $106.5 billion. As noted, think of this as the amount of money that would be left if Apple were to cease operations, sell everything it owns, and pay off its debts.

This is not a measure of how much this business is worth. Apple is a highly profitable and efficient business that is growing, even with its large size. In fact, Apple's market value is currently about $4.22 trillion -- about 40 times its shareholders' equity (book value).

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

How to create a balance sheet

If you own a small business or simply want to analyze your personal financial condition, a balance sheet can help you tremendously. You can start by listing your assets, including your cash, investments, accounts receivable (money you're owed), any inventory you own, property you have, and so forth.

Next, list all the debts and other obligations you have. You can find excellent balance sheet templates online to help you stay organized. Subtract the liabilities on your balance sheet from the assets to find the equity you have in your business or your personal net worth.

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FAQs

Balance sheet FAQs

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About the Author

Matt Frankel, CFP®, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. 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, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

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@MattFrankelUSC

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

How balance sheets work

The balance sheet formula