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The DNA of a balance sheet consists of its core components that provide a snapshot of a company’s financial position at a specific point in time. These components include assets, liabilities, and equity.

Assets represent everything the company owns, categorized into current assets (like cash and inventory) and non-current assets (such as property and equipment). Liabilities detail what the company owes to outsiders, divided into current liabilities (like accounts payable and short-term debt) and long-term liabilities (such as bonds payable).

Equity reflects the ownership interest in the company, consisting of common stock, retained earnings, and additional paid-in capital. The balance sheet follows the accounting equation: Assets = Liabilities + Equity, ensuring that the financial statements are balanced and accurately represent the company’s financial health. Understanding these elements is crucial for analyzing a business’s stability and operational efficiency.