Balance-Sheet Reading Cards: The Five First Questions
Recall five questions that turn a balance sheet into a business read.
What changed the most? Find the largest absolute and percentage moves in assets, liabilities, and equity. Big moves reveal where behavior changed. Current ratio or quick ratio first? Use both when inventory or prepaids drive the change. “Total assets rose, so the company is safer.” Your line Maybe. What funded the asset growth, and can those assets generate cash before claims come due? Treating asset growth as safety. It connects resources to funding and timing. What liability timing matters most? Current debt, AP pressure, accrued expenses, taxes, and covenant-linked obligations. The next maturity can matter more than total liabilities.
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