Why it matters
It helps you understand what supports the business and what it owes. Customer debts, stock and equipment may appear alongside cash; supplier balances, loans and tax liabilities show commitments. Comparing successive balance sheets can reveal money tied up in working capital even when profit is rising. Read it with the profit and loss account rather than in isolation.
A practical example
A business has £15,000 cash, £10,000 owed by customers and £5,000 equipment, with £12,000 of liabilities. In this simplified example, net assets are £18,000. That figure does not mean £18,000 is available to withdraw: some value is in equipment or unpaid invoices.
A common misunderstanding
Net assets are not an independent valuation of what someone would pay for the business. The accounting basis, asset values and unrecorded commercial factors can make a sale price very different. Nor does a positive balance sheet prove that every bill can be paid on time.
Sources & further reading
General information for UK readers, updated 3 November 2026. Examples are illustrative. Tax treatment depends on the facts and current rules; seek advice before making a decision.