Clean Balance Sheet


DEFINITION of 'Clean Balance Sheet'

A company's financial statement that summarizes its assets, liabilities and shareholder equity, and where the company is shown to have very little or no debt. A clean balance sheet indicates the company has no significant debt during the statement period. A company that has a lot of debt may be advised to "clean up its balance sheet" in order to become more attractive to investors.

BREAKING DOWN 'Clean Balance Sheet'

A clean balance sheet is challenging to maintain, especially for businesses that derive a significant percentage of yearly revenues from seasonal activity. Many investors find companies with clean balance sheets attractive because the minimal leverage reduces downside risks.

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  1. Does the balance sheet always balance?

    Yes, a balance sheet should always balance. The name "balance sheet" is based on the fact that assets will equal liabilities ... Read Full Answer >>
  2. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  3. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  4. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  5. What are working capital costs?

    Working capital costs (WCC) refer to the costs of maintaining daily operations at an organization. These costs take into ... Read Full Answer >>
  6. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>

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