Balance sheet

Definition

A snapshot of what a business owns and owes on a single date, with the difference between the two being the owner's equity.

Why It Matters

The income statement tells you whether the business earns; this tells you what condition it is in, and the two disagree more often than a first-time buyer expects. A profitable company with stretched payables, aging receivables, and a lien on its equipment is a different purchase from an identically profitable one without them, and the working-capital level you will argue over at closing is read from here.