A Beginner's Guide to Reading a Balance Sheet

Three Sections, One Equation

Assets equal liabilities plus equity. Every balance sheet is just that sentence expanded.

What to Look At First

Start with current assets versus current liabilities. If short-term obligations outweigh short-term resources, everything else is secondary.

Red Flags

Watch for goodwill that dominates total assets, debt that grows faster than revenue, and inventory that climbs while sales stay flat.