Seeing your balance clearly is like looking at yourself in the mirror: it shows you what is there, not what you would like to see. A powerful and strategic way to read it is to divide it into two large blocks: on the one hand, the sources of financing (liabilities and heritage) and, on the other, the uses of these funds (assets). This structure allows us to understand, with greater clarity, how money flows within the business, where the resources come from and what they have invested in.
This approach not only helps verify that the accounting equation is fulfilled (assets = liabilities + equity), but also reveals if the company is using its resources well, if it is financing productive assets or if there is immobilized capital that could be optimized. In essence, this reading serves to assess the financial efficiency of the operation.
funding sources.
The sources reflect the origin of the money that finances the company’s assets. Generally speaking, they are divided into:
I. Equity (own financing)
- Social capital: the initial or additional contribution made by the partners. It reflects shareholder commitment to business growth.
- Retained earnings: Accumulated profits that have not been distributed as dividends, but have been reinvested. They represent self-financing and usually indicate financial maturity.
A company with a good patrimonial basis can face ambitious projects with less dependence on debt.
II. Liabilities (third party financing)
- Bank Financing: Investment Credits, Financial Leasing, Working Capital Lines.
- Financing with suppliers: Term payment agreements for inputs or raw materials.
- Tax and labor obligations: taxes caused, layoffs, premiums or withholdings pending payment.
A strategic analysis must evaluate the capital structure of the company: is there a balance between own capital and debt? Is credit being used well or is there risk of over-leverage?
The uses of the funds: the side of the assets.
The assets reflect the destination of the resources: they show what the money has been invested in and how aligned it is with the generation of value.
I. Operating assets
- Current Operating Assets: Cash, Banks, Accounts Receivable and Inventories.
- Non-current operating assets: machinery, production facilities, brands, licenses.
II. Support assets
- offices, administrative technology, furniture, commercial software, among others.
III. non-operating assets
- Financial investments without strategic function, unused properties, empty land or obsolete assets.
Case study: Textiles Andina S.A.S.
Profile: Fictitious Colombian company dedicated to the manufacture and marketing of clothing.
- Annual sales: $3,000 million COP
- Total assets: $2,000 million COP
| use category | specific asset | value (mm cop) | %s / Total assets | OBSERVATIONS |
| Operational – Short Term | Inventories (MP, PP, PT) | 500 | 25% | key to meeting the demand |
| – | accounts receivable | 300 | 15% | Wholesale customers with 30-60 days |
| – | CASH AND BANKS | 100 | 5% | daily operating flow |
| Operational – Long Term | Clothing and embroidery machinery | 400 | 20% | In house production |
| – | Own commercial premises | 150 | 7.5% | Generates rent savings |
| – | ERP software and productive licenses | 50 | 2.5% | Improve operational efficiency |
| Administrative support | offices and furniture | 100 | 5% | Management, Marketing and Finance |
| – | Technology equipment (administrative) | 50 | 2.5% | Commercial and administrative management |
| non-operational | Unused Lot (Medellín – Outskirts) | 350 | 17.5% | does not contribute to the operation today |
This type of analysis helps to visualize the financial structure in a comprehensive way: it allows to evaluate if the business is well financed, if there are unproductive assets or if there are opportunities for optimization.
Key Questions for Strategic Reading
- How much of the money you have can you use today?
- Are you using more debt than your own capital?
- Are your accounts receivable growing more than your sales?
- Do you have unproductive assets that do not generate income?
The hidden cost of unproductive assets
Good management not only asks how much I have, but what I have it for, how I use it and what I financed with. Eliminating or transforming unproductive assets is a direct way to free cash, reduce costs and improve the profitability of invested capital.
Conscious financial management must constantly evaluate whether all assets actually contribute to the business and, if not, look for ways to monetize them, sell them or give them a use aligned with the business strategy. Maintaining assets without a clear function can divert the focus of the company, compromise its liquidity or affect future financing decisions. In addition, many of these assets have hidden costs: maintenance, taxes, surveillance, insurance or depreciation.
These assets, even if they appear on the balance sheet, represent an opportunity cost: it is money that could be generating returns if it were correctly placed, either in inventory that is broken, in productive machinery or in debt reduction.
Clarus Council: If reading your balance sheet you cannot clearly explain what each asset is for, it is time to make a thorough review of its financial structure.
At Clarus Consultores we help you read your balance sheet with the same rigor as a senior financial management, identifying capital leaks and real profitability opportunities. Let’s talk about the financial structure of your company.