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Assets and liabilities must be balanced for stability from "summary" of Romancing the Balance Sheet: For Anyone Who Owns, Runs or Manages a Business by Anil Lamba
Every business stands on the foundation of its financial health, where the balance sheet plays a pivotal role. At the heart of this balance sheet lies the intricate relationship between what a business owns and what it owes. The essence of this relationship is not merely about number matching; it’s about ensuring that resources can effectively support obligations. When a business accumulates assets, it signifies growth potential and operational capability. However, these assets often come with corresponding liabilities—debts or obligations that must be settled. If a business leans too heavily on liabilities, it risks stifling its growth as funds are diverted to pay off debts instead of being reinvested into the business. Conversely, an asset-heavy balance can indicate strong investment but may also signal underutilization of resources if those assets do not generate sufficient returns. Achieving equilibrium requires a clear understanding of the ...
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