A balance sheet is a financial statement that records the assets, liabilities and equity of an organization at a specific point in time. Assets are items a company owns which can be converted into cash or used to pay a liability. Liabilities are obligations incurred by the company that must be paid in order to satisfy them. Equity is any ownership interest that has not beenencumbered or pledged as collateral by the organization. It reflects both retained earnings and capital infusion from owners. The three components together present a snapshot of an organization’s positive and negative financial standing. Investing in a company starts with an understanding of its balance sheet.