A balance sheet is a financial statement that provides an overview of a company's assets, liabilities and equity at a given point in time. The balance sheet shows the dollar amount of your assets compared to your liabilities and equity. Balance sheet assets include, among others, cash, inventory, receivables, investments, land, buildings and equipment. The liability side of the balance sheet includes accounts payable, notes payable, wages and salaries payable, interest payable, etc. Owner’s equity on a balance sheet is equal to assets – liabilities. Some accounts in stockholders' equity would include: common stock, preferred stock, retained earnings, and treasury stock, among others. Investors look at balance sheets because it is a good indication of a company's performance. According to Richard Loth (2016), the strength of a company can be assessed through its balance sheet by three main investment measures: 1) the cash conversion cycle, 2) the fixed asset turnover rate, 3) the rate return on assets and 4) the impact of intangible assets. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an Original Essay A company has two choices when financing its assets on a balance sheet. The first option is to borrow, via the company's liabilities and the second option, from equity or shareholders. When a company borrows against its liabilities, it essentially accumulates a note that it must repay to others. When the company finances its assets through equity, it either invests its own money in the company or investors invest money in the company. If the company is public, it can issue shares to investors willing to increase their assets with equity. Capital is an essential element in identifying a healthy and healthy business. If the business does not have capital, it cannot operate and therefore will never grow. The two categories into which working capital can be divided are gross working capital and net working capital. Gross working capital, according to Motley Fool (2016), “is a measure of a company’s total financial resources.” Gross working capital is the total assets of a company that can be converted into cash in one year or less. It includes assets such as cash, accounts receivable, short-term investments, inventory, etc. Net working capital, on the other hand, shows the overall picture of a company's financial situation much better. Net working capital is discovered when we take the company's total current assets and subtract the current liabilities. So, unlike gross working capital, when you take out a loan, your net working capital will not increase. The debt-to-income ratio is equal to your total debt divided by your total assets. This is a ratio that can help determine both the company's and the consumer's debt level. The higher the ratio of this equation, the more leverage the company has and the lower the ratio of this equation, the more leverage the consumer has. However, this equation doesn't always tell the whole story. To get the full picture, you need to look at industry type as well as debt ratio, as some industries will almost always have a higher or lower debt ratio than another industry type. By using all of these processes above, you can illustrate to your boss the strength or weakness of your company...