Balance Sheets

A Balance Sheet is a financial statement that provides a snapshot of a startup’s financial position at a given point in time. It shows what the company owns (assets), owes (liabilities), and the remaining value for owners (equity).

Key Components of a Startup’s Balance Sheet:

  1. Assets (What the company owns)
    o Current Assets: Cash, accounts receivable, inventory, short-term investments.
    o Fixed/Long-Term Assets: Equipment, real estate, intellectual property (e.g., patents, trademarks).
    o Intangible Assets: Brand reputation, goodwill, software rights.
  2. Liabilities (What the company owes)
    o Current Liabilities: Short-term debts, accounts payable (money owed to suppliers), payroll obligations.
    o Long-Term Liabilities: Loans, investor obligations, lease agreements.
  3. Equity (What’s left for owners after paying liabilities)
    o Owner’s Equity: Money invested by founders or shareholders.
    o Retained Earnings: Profits reinvested in the company rather than distributed.

Why a Balance Sheet Matters for a Startup

  • Investor & Lender Assessment: Investors analyze assets versus liabilities to gauge financial stability.
  • Growth & Sustainability: Helps founders track cash reserves, debt levels, and overall financial health.
  • Strategic Decision-Making: Essential for budgeting, forecasting, and financial planning.

Unlike the Profit & Loss Statement (which shows business performance over time), the Balance Sheet is a financial snapshot at one point in time—usually at the end of a quarter or fiscal year.

Written by Swedish Ventures, Rolf Olsson. Remarks to this article could be sent to glossary@swedishventures.se.

ASO: DD-03-02