Balance sheet: What a company owns, what it owes
What a balance sheet shows, the difference between equity and debt, and how to read the debt-to-equity ratio of an Indian company.
The balance sheet shows whose money runs the company
| Measure | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Equityshareholders’ money, ₹ crore | 600 | 640 | 680 | 720 | 760 |
| Debtmoney borrowed, ₹ crore | 180 | 220 | 400 | 1,050 | 1,450 |
| Debt to equityborrowed ÷ own money | 0.3× | 0.3× | 0.6× | 1.5× | 1.9× |
A company is funded by two kinds of money: the owners’ (equity) and borrowed money (debt). The balance sheet is a snapshot of both on the last day of the year.
What to look for
- Equity: shareholders’ money, including profits kept in the business.
- Debt: loans that must be repaid with interest, in good years and bad.
- Debt to equity: debt ÷ equity. Below 0.5 is comfortable; above 1 deserves a closer look.
Debt isn’t bad by itself. Debt growing much faster than the business is.
Debt to equity is now 1.9. What does that mean?
- For every ₹1 the owners put in, the company has borrowed about ₹1.90
- The company has ₹1.90 of cash for every ₹1 of debt
- The company is 1.9 times bigger than last year
Show the answer
For every ₹1 the owners put in, the company has borrowed about ₹1.90. Debt of ₹1,450 crore ÷ equity of ₹760 crore ≈ 1.9. Lenders now have more money in the company than its owners.
What the numbers showed
In FY23 debt jumped from ₹400 crore to ₹1,050 crore, while equity barely moved. That’s when the balance sheet changed character.
Debt isn’t bad by itself. Debt growing much faster than the business is.
Practise Balance sheet, free
Reading about it is step one. In MarketSeekho you look at a company’s numbers, make a call, say why, and get graded on your reasoning, not luck.
Common questions
What is Balance sheet?
A company is funded by two kinds of money: the owners’ (equity) and borrowed money (debt). The balance sheet is a snapshot of both on the last day of the year.
What should I look for in balance sheet?
Equity: shareholders’ money, including profits kept in the business. Debt: loans that must be repaid with interest, in good years and bad. Debt to equity: debt ÷ equity. Below 0.5 is comfortable; above 1 deserves a closer look.
Debt to equity is now 1.9. What does that mean?
For every ₹1 the owners put in, the company has borrowed about ₹1.90. Debt of ₹1,450 crore ÷ equity of ₹760 crore ≈ 1.9. Lenders now have more money in the company than its owners.
How can I practise balance sheet for free?
MarketSeekho has a free four-page chapter on Balance sheet (learn, answer a question, spot it in a company’s numbers, then make a call) and an unlimited Spot the red flag practice game graded on your reasoning. No sign-up or money needed.