Balance Sheet Reading

Everything a company owns was paid for by lenders or by owners

This always balances because it is the same money counted twice. The left side shows what the company bought: factories, cash, stock, money owed by customers. The right side shows who paid for it: lenders and suppliers (liabilities) or shareholders (equity). Equity is what would be left for owners if every asset were sold at book value and every debt paid off.

A balance sheet is a photograph taken on one day, usually 31 March. The profit and loss statement shows what happened over the year. You need both, because the question that matters is how much profit the equity produced.

Three real balance sheets, side by side

Consolidated, 31 March 2026, ₹ crore, in Screener.in's condensed format:

Equity is equity capital plus reserves. Most of each company's reserves are profits it earned and kept rather than paid out as dividends.

Read each column and a different business appears:

• Reliance is building. ₹2,37,686 crore of CWIP is capital already spent on plants and networks that are not yet earning. That is 11% of everything it owns. Borrowings rose ₹28,649 crore during the year.
• TCS owns almost nothing physical. It needs ₹31,343 crore of fixed assets to earn ₹49,454 crore of profit a year, because its real assets are about 600,000 employees, and employees never appear on a balance sheet.
• Maruti is a car maker that is half a fund. ₹76,838 crore, 52% of everything it owns, sits in investments rather than in the car business.

The number that matters is what each rupee of equity earns

Return on equity (ROE) is net profit divided by shareholders' equity. It is how much the owners' money earned in a year.

A company earning 9% on its equity is not doing much more for its owners than a bank deposit would, even if its profit sets a national record. Over long periods a company that earns a high ROE and reinvests most of its profit tends to compound its share price. One that earns a low ROE on a growing pile of equity does not.

Debt is a multiplier, in both directions

Debt-to-equity is borrowings divided by shareholders' equity. At the end of FY26:

• TCS: ₹11,283 ÷ ₹1,07,240 crore = 0.11
• Reliance: ₹4,02,962 ÷ ₹9,04,030 crore = 0.45
• Maruti Suzuki: ₹102 ÷ ₹1,07,156 crore = 0.00

Borrowing lets a company earn on more money than its owners put in. When the business earns more than the interest rate, owners gain. When it earns less, the interest still has to be paid, and it comes out of the owners' share first.

• Debt-to-equityBelow 0.5 for most non-financial companiesAbove 1.5, or rising every year while profit is flat
• Current ratio1.2 – 2.0: bills due within a year are coveredBelow 1.0: the company needs new money or longer credit to pay what is due this year
• Return on equity (ROE)15% or more, sustained over five yearsBelow 10%, which is close to what a bank deposit earns

What counts as high depends on the business. A power utility or a telecom network has predictable cash flows and can carry debt of 1.5 times equity. A software company should not need any. Banks and NBFCs are different again: their borrowings are their raw material, so debt-to-equity says almost nothing about them.

Five warning signs, and where each one shows up

None of these are verdicts. Each one is a question that the notes to the accounts should answer. If the notes don't answer it, the question stands.

Read the balance sheet in this order

1. Equity, then profitDivide net profit by shareholders' equity. Under 10% means the owners' money is barely beating a deposit.
2. Borrowings against equityDebt-to-equity, and whether borrowings rose faster than profit over the last three years.
3. What the assets areFixed assets, unfinished capital work, idle investments, or money owed by customers? Each tells a different story about the business.
4. Three years, not oneA single balance sheet is a photograph. Line up three or five and the trend is what you are actually buying.

Screener.in, Tijori and the company's own annual report all show the same figures. The annual report also has the notes, which is where the explanations are. Next, read the cash flow statement: it shows whether the profit actually arrived as cash.