The balance sheet provides information about the asset and liability situation of a company. 

• Assets = what the company owns
  • Current assets = short-term
    These can easily be converted into cash and are used for the company's operating activities. They are not owned as long-term investments. They can include: cash, temporary financial investments, inventory etc.
  • Non-current assets = long-term
  • The purpose of non-current assets is to keep them within the company and make use of their benefits over a longer period of time. They are not owned to be converted into cash on short notice, but as a long-term investment. They can include: tangible assets (property, plants, equipment) and intangible assets (long-term investments, patents)

• Liabilities = what the company owes
  • Current liabilities = short-term
    Obligations (accounts payable, supplier invoices, etc.) which are due within a short amount of time, usually one year. They are settled using current assets.
  • Non-current liabilities = long-term
    ​Regular and long-term obligations (loans, leases, pensions)

• Net assets = assets – liabilities
  Assets should be greater than liabilities. If a company’s liabilities exceed its assets, it is a sign of financial distress and indicates that a company may not be able to meet its obligations.
  Important: If current liabilities are greater than current assets, it means that the company does not have enough cash or cash-like assets to pay their short-term obligations. Even though the total asset/liability situation may look okay, this could result in a lack of liquidity (cash flow insolvency).

• Shareholder equity = total assets – total liabilities
  This is the amount of money that would be returned to the company’s shareholders if the company were liquidated. It includes funds and retained earnings.