Balance Sheet Get a snapshot of your business's financial health with a balance sheet.

The balance sheet provides a snapshot of the business'sassets, liabilities and owner's equity for a given time. Again,using an apparel manufacturer as an example, here are the keycomponents of the balance sheet:

  • Current assets: These are the assets in a business thatcan be converted to cash in one year or less. They include cash,stocks and other liquid investments; accounts receivable;inventory; and prepaid expenses. For a clothing manufacturer,inventory would include raw materials (yarn, thread, etc.),work-in-progress (started but not finished), and finished goods(shirts and pants ready to sell to customers). Accounts receivablerepresent the amount of money owed to the business by customers whohave purchased on account.
  • Fixed assets: These are the tangible assets of abusiness that will not be converted to cash within a year duringthe normal course of operation. Fixed assets are for long-term useand include land, buildings, leasehold improvements, equipment,machinery and vehicles.
  • Intangible assets: These are assets that you can'ttouch or see but that have value. Intangible assets includefranchise rights, goodwill, noncompete agreements, patents and manyother items.
  • Other assets: There are many assets that can beclassified as other assets, and most business balance sheets havean other assets category as a "catch-all." Some of themost common other assets include cash value of life insurance,long-term investment property, and compensation due fromemployees.
  • Current liabilities: These are the obligations of thebusiness that are due within one year. Current liabilities includenotes payable on lines of credit or other short-term loans, currentmaturities of long-term debt, accounts payable to trade creditors,accrued expenses and taxes (an accrual is an expense such as thepayroll that is due to employees for hours worked but has not beenpaid), and amounts due to stockholders.
  • Long-term debt: These are the obligations of thebusiness that are not due for at least one year. Long-termliabilities typically consist of all bank debt or stockholder loanspayable outside of the following 12-month period.
  • Stockholders' equity: This figure represents thetotal amount invested by the stockholders plus the accumulatedprofit of the business. Components include common stock,paid-in-capital (amounts invested not involving a stock purchase),and retained earnings (cumulative earnings since inception of thebusiness less dividends paid to stockholders).

Excerpted from Start Your Own Business: The Only Start-UpBook You'll Ever Need, by Rieva Lesonsky and the Staff ofEntrepreneur Magazine, © 1998 Entrepreneur Press

Editor's Pick

A Father Decided to Change When He Was in Prison on His Son's Birthday. Now His Nonprofit Helps Formerly Incarcerated Applicants Land 6-Figure Jobs.
A Teen Turned His Roblox Side Hustle Into a Multimillion-Dollar Company — Now He's Working With Karlie Kloss and Elton John
3 Mundane Tasks You Should Automate to Save Your Brain for the Big Stuff
The Next Time Someone Intimidates You, Here's What You Should Do
5 Ways to Manage Your Mental Health and Regulate Your Nervous System for Sustainable Success
Business News

'I Am Just Floored': Woman Discovers She Won $1 Million Lottery Prize While Checking Her Email at Work

Initially, she thought the email was a scam, but went to lottery headquarters and walked away with a six-figure check after taxes.

Business News

Amazon Might Soon Be Adding Ads to Prime Video

The company wants to generate more ad revenue for its streaming service.

Business News

'I've Got the Bug for Business': See All of Mark Wahlberg's Entrepreneurial Endeavors, From Marky Mark and the Funky Bunch to Wahlburgers

Mark Wahlberg owns businesses in several categories, including entertainment production, apparel, fitness, and nutrition.


5 Simple Tweaks for Better Email Deliverability

Email success starts in the inbox. Learn five easy ways to tweak your strategy so you can achieve better email deliverability.


'Entrepreneur Elevator Pitch' Is Back Open for Business!

Check out this preview of season nine of our hit show "Entrepreneur Elevator Pitch." Big ideas and big money are on the line!


How Leveraging External Trainers Can Advance Your Companies Growth and Talent Optimization

Discover how your organization can use external trainers to build capabilities, lower training cost and create a sustainable workforce for the future, while still delivering high-quality training and lasting results.