A balance sheet describes a business at a point in time. Assets show the resources it controls, liabilities show obligations, and equity is the residual interest after liabilities are deducted.
The totals are a starting point. Examine how much cash is available, how quickly receivables can be collected, and when borrowings fall due. Assets that cannot easily be converted to cash may offer little help with an imminent payment.
Compare several periods and read the accompanying notes. A large change in inventory or receivables can prompt useful questions about trading conditions, collection practices or accounting assumptions.
Read the balance sheet alongside the income and cash flow statements. Each answers a different question, and none alone provides a complete picture. This article is a general accounting explainer.