Finding out what kind of shape a company is in financially before before owning a stock is a major key.

The balance sheet can give you all the information you need to know.

Here's what one is and what to look for.

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A balance sheet is simply a financial statement that provides you with a company's:

- Assets (what it owns)
- Liabilities (what it owes)
- Equity (Assets - Liabilities)

The whole point of reviewing the balance sheet is to see whether a company financially stable, or if it may run the risk of bankruptcy.

As a shareholder, you are an owner of the company and you want to know what kind of risk you'll be exposed to by owning it.

The assets section lists everything the company owns (plants, facilities, ect)

The main thing to look for is how much CASH a company holds.

If a company has plenty of cash, you know it will be able to get through tough times (like now during covid19) without taking more debt.

The liabilities section contains what the company owes

The main thing to look for is the mix of short-term and long-term debt that it is responsible for

If the company has a ton of debt it could run the risk of bankruptcy if business slows down dramatically ( airlines - covid)

The equity section essentially lays out what is available to the owners once all of the debt has been paid off.

This is used in important rarios like Debt to Equity.

If this number grows over time, it can be a sign of improving financial health.

Publicly traded companies are required to release their balance sheets for everyone to see and analyze.

It's completely free to look up and can be found on the company's investor relations site or sites like Markwatch or Yahoo Finance.

Some helpful ratios that you can look up that let you know if a company is financially stable include:

- Debt to Equity
- Current Ratio
- Quick Ratio

Again, these can be found on reliable sites like Yahoo Finance.

I hope this helps.