Balance sheet

A photograph of what a business owns and owes at a single instant, usually the last day of the financial year. It says nothing about the year that led to it, which is why it is read alongside the other two statements rather than on its own.

Assets are listed by how quickly they turn into cash. Cash, receivables and inventory sit at the top as current assets; plant, land and goodwill sit below as non-current. Liabilities follow the same logic, split into what falls due within a year and what falls due later.

A company with ₹2,650 crore of total assets, ₹1,180 crore of liabilities and ₹1,470 crore of equity has funded a little over half its asset base from its owners.

Two questions get most of the value out of it. What has grown faster than sales, and who has a claim ahead of the shareholder?

The second question is the one most readers skip. Every rupee on the liability side is somebody standing in front of the shareholder in a queue, and the queue has an order: secured lenders, then unsecured, then everyone else, then the owners. A balance sheet read as a queue rather than as a table changes what the numbers mean. A company with ₹1,180 crore of liabilities against ₹2,650 crore of assets has a comfortable cushion; the same company with ₹2,300 crore of liabilities has almost none, and a 15% fall in asset values would leave the shareholders with nothing.