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They open them up turn to page one and there is your company laid bare open to them. And they ask you questions; "why is this line a negative number how did you arrive at the valuation of that line what are the terms of this liability." Don t you want to be able to confidently look them in the eye and answer those questions? What Makes Up a Balance Sheet Hopefully you have been exposed to some basic accounting and understand the concepts that some numbers in accounting are recorded as debits and some numbers as credits. These numbers are often represented as positive and negative numbers and the balance sheet as its name suggests must balance i.e. the negative and the positive numbers must total zero.
Clear title ownership of assets such as your home reduce cash draw and this is incredibly important as you approach retirement. The financial crisis we are in now is described as a Balance Sheet crisis. We are in this crisis because nobody was paying attention to their Balance Sheets not even at the towering heights of our financial infrastructure. The symptoms were everywhere. While researching I found that the top sites on the internet for Balance Sheet are those who want to sell you something so that they can gain access to any assets on your balance sheet that might be left after this disaster.
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It just makes sense that it would be zero. You may have student loans but that is offset by some form of education that will allow you to make more money in the course of your lifetime. The key is that this is the best time to start building your net worth. It allows the principal of compounding value to work its magic on your assets for decades. That saves you a lot of work later in life. However most of us are not that wise and we find ourselves in our 30s and 40s with little or no Net Worth. This means you have less time for compounding to work. So you have to work harder and especially manage your money smarter to prepare for the financial challenges you face going forward. The nice thing is that you have probably made some mistakes that have made you much wiser.