Clean Balance Sheet

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Unconsolidated Subsidiary

    A company that is owned by a parent company, but whose individual ...
  2. Senior Stretch Loan

    A specific type of loan to a business entity, which possesses ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  5. Black

    A description of a positive balance on a company's financial ...
  6. Accountant

    A professional person who performs accounting functions such ...
RELATED FAQS
  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. How is accounting in the United States different from international accounting?

    Despite major efforts by the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, ... Read Full Answer >>
  3. What does the Dividend Discount Model (DDM) show an investor about a company?

    The dividend discount model, or DDM, is not designed to be used in forecasting any possible capital gains from increases ... Read Full Answer >>
  4. If a company has a high debt to capital ratio, what else should I look at before ...

    A variety of equity valuation metrics can be utilized to evaluate a company along with the debt to capital ratio to get a ... Read Full Answer >>
  5. How can a firm bring down its operating leverage?

    A company with a lower percentage of fixed costs and a higher percentage of variable costs uses less operating leverage. ... Read Full Answer >>
  6. How does DuPont Analysis measure profitability?

    DuPont analysis determines profitability by measuring assets at their gross book value, which produces a greater return on ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    How To Decode A Company's Earnings Reports

    Read between the lines to decipher a company's true financial condition.
  2. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  3. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  4. Investing Basics

    Understanding The Cash Conversion Cycle

    Find out how a simple calculation can help you uncover the most efficient companies.
  5. Investing Basics

    How To Evaluate A Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  6. Investing

    Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.
  7. Markets

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  8. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  9. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  10. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center