The balance sheet shows your company’s financial condition — its assets vs. liabilities — at a specific point in time. It is used to provide a picture of the financial status of the business. Businesses with strong balance sheets are more likely to survive economic downturns and be ready to thrive when the going gets good again. So, what does a strong balance sheet look like and why is it important? How can you take steps to strengthen yours? Some line items are more critical to your success than others. What is right depends on the nature of your business and industry benchmarks. A strong balance sheet goes beyond simply having more assets than liabilities. Businesses with strong balance sheets are those which are structured to support the business goals and strive for financial performance.
- A healthy balance sheet provides the structure and data you need to optimize working capital and improve your liquidity.
- A healthy balance sheet reduces leverage and improves debt capacity.
- A heathy balance sheet increases velocity of the cash cycle.
- A healthy balance sheet minimizes the cost of capital.
In general, a healthy balance sheet maximizes financial performance, allows management of the business to be more agile, and provides additional options to help shape a more profitable future. Want to learn more about these concepts and to understand what it takes to build a healthy balance sheet? Review the full white paper, Building a Healthy Balance Sheet below.