Balance Sheet — Liabilities and Equity
What it owes, and what owners hold.
The right side of the balance sheet shows how the assets were funded, either by lenders (liabilities) or owners (equity). Read it for how much is owed, when it's due, and how much genuine owner capital sits underneath. Liabilities Trade payables Money owed to suppliers. Stretching payables can flatter cash flow temporarily. Short-term borrowings Debt due within a year. Watch if it's large versus cash on hand. Long-term borrowings Debt due beyond a year. Check the interest rate and maturity schedule in the notes. Provisions Set-asides for likely future costs (warranties, legal, loan losses). Contingent liabilities Possible obligations shown in the notes, not on the face. Can be large, read them. Equity Share capital Face value of shares issued, the base owner contribution. Share premium Amounts paid above face value when shares were issued. Retained earnings Accumulated profits kept in the business. Growing retained earnings signal a compounding business. Reserves Other set-asides (general, revaluation, statutory). Banks in Nepal must keep specific regulatory reserves. Total equity Rs 200 crore, of which retained earnings Rs 120 crore. Most of the net worth was built from profits kept in the business, usually a healthier sign than equity built mainly from repeated share issues. Always tie this back: (assets) − (liabilities) = (equity). If equity is thin relative to debt, the company is fragile even if it looks profitable.
Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: The Annual Report.