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42. How to Explain: The Balance Sheet

The CFO Report

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How Do Capital Contributions and Accumulated Profits All Relate to Your Business's Financial Health?

When a business that's financially healthy runs its balance sheet, it'll see both the assets and the liabilities and equity section are both positive. The bigger that number gets, typically it means the stronger your business's financial health is. Once those numbers are negative, it means your business is upside down. To calculate equity, we simply take the capital contributions we put into the business,. We add our accumulated profits, and then we subtract our distribution.

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