How to read a Balance Sheet: a guide for Pakistani business owners
Your balance sheet tells you the financial health of your business at any moment. Here is how to read it, what to look for, and what the numbers mean.
The three sections of a balance sheet
Every balance sheet has three sections: Assets (what your business owns), Liabilities (what your business owes), and Equity (the net worth belonging to the owners). The fundamental equation is always: Assets = Liabilities + Equity.
Current vs non-current assets
Current assets are things you expect to convert to cash within 12 months — cash at bank, accounts receivable, inventory, and short-term investments. Non-current assets are long-term: property, vehicles, machinery, and equipment (less accumulated depreciation).
What liabilities reveal
Current liabilities include bank overdrafts, accounts payable to vendors, short-term loans, and accrued expenses due within a year. Long-term liabilities are term loans, lease obligations, and deferred tax. A business with current liabilities greater than current assets may have cash flow problems.
Key ratios to calculate
Current Ratio = Current Assets ÷ Current Liabilities. A ratio above 1.5 is generally healthy. Debt-to-Equity = Total Liabilities ÷ Total Equity — lower is safer. Working Capital = Current Assets − Current Liabilities — this is the cash buffer available for day-to-day operations.
Using your FinanceOS balance sheet
In FinanceOS, the balance sheet is updated in real time as transactions are posted. You can view it for any date range, compare to prior periods, and export to PDF or Excel. The comparative columns (this year vs last year) immediately reveal whether your financial position is improving.
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