When reading a balance sheet, focus on three key components: assets, liabilities, and shareholders’ equity. Assets reveal what a company owns, while liabilities show its financial obligations. Shareholders’ equity indicates the remaining value after liabilities are deducted from assets. Examine current assets and current liabilities to assess short-term financial stability. Review debt levels to understand financial risk and evaluate retained earnings for insights into accumulated profits. Comparing balance sheets across multiple periods helps identify trends. For a complete picture of financial health, consider the balance sheet alongside income statements and cash flow statements.