📅 Our upcoming information sessions
May 5, 2025

Easy-to-read balance sheets: a guide for non-financial professionals

Finance
Acccounting
Discover how to effectively analyze a balance sheet without financial expertise. Assets, liabilities, key ratios: master the fundamentals to assess a company's financial health.
Easy-to-read balance sheets: a guide for non-financial professionals
3 minutes of reading

Understanding a company's financial statements is essential, even without accounting expertise. Of the three fundamental documents (balance sheet, income statement and cash flow statement), the balance sheet is particularly important. It provides an accurate snapshot of a company's assets at a given date, revealing what it owns and how it is financed.

Specific features of the balance sheet

A summary document, it shows the balance between the company's resources (assets) and their sources of financing (liabilities and shareholders' equity).

The fundamental equation of the balance sheet is as follows: Assets = Liabilities + Equity.

The balance sheet enables us to quickly assess a company's solidity, identify certain risks and facilitate dialogue with financial partners.

Understanding the structure of a balance sheet

The assets side of the balance sheet represents everything the company owns to operate. It is divided into two main categories:

1. Non-current assets (over one year) :

  • Intangible assets: patents, trademarks, licenses
  • Tangible assets: buildings, land, equipment
  • Financial items: investments in other companies

2. Current assets (less than one year) :

  • Inventories: merchandise, raw materials and finished goods
  • Accounts receivable: what customers owe the company
  • Cash and cash equivalents: money available in bank accounts and cash on hand

Effective asset management is essential to a company's financial health. For example, too much inventory or trade receivables can create cash flow problems.

The liabilities side of the balance sheet shows how the company has financed everything it owns. It consists of two main parts:

1. Equity: funds contributed by owners or generated by the company.

2. Long-term financial debts: bank loans to be repaid over several years.

3. Short-term debt: debts to suppliers, taxes payable, etc.

The balance between these two sources of financing reveals whether the company is financially dependent on its creditors.

Balance sheet analysis

Financial ratios are used to summarize balance sheet information into easily interpretable numerical indicators. In particular, they show whether the company is liquid and solvent.

  • Liquidity: a company is liquid if it can meet its short-term debts with its current assets.
  • Solvency: a company is solvent if it has the capacity to repay all its medium- and long-term debts.

An in-depth analysis of liquidity and solvency requires ratios to be compared over at least three consecutive years, and benchmarked against those of major competitors. Sudden or unusual changes deserve special attention.

In conclusion, balance sheet analysis, far from being the preserve of financial experts, is an accessible and valuable skill for any manager or entrepreneur.

Interested in financial accounting? Join us at ⬇️

Latest posts
The 10 essential skills for becoming a project manager in 2025
08 October 2025

The 10 essential skills for becoming a project manager in 2025

Responsible for managing projects from start to finish, project managers are able to coordinate the various stakeholders, ensuring that objectives are achieved on time and within …
Leadership Project
Launch of our new website
08 September 2025

Launch of our new website

A redesigned website to become your best ally in choosing your training course, clearer, faster and more intuitive. Discover how each new feature has been designed to simplify …
Executive Education
How we collect feedback on our programs?
05 September 2025

How we collect feedback on our programs?

Reliable, anonymous, and structured feedback on 32 criteria to improve our executive education programmes quickly and effectively.
Executive Education Lifelong learning
search
most common searches
data
management
ia
leadership
marketing
find your open program.
Explore more than 50+ programs at Executive Education HEC Lausanne
join an infosession