What the Company Owns and Owes

4.1 — A photograph, not a film

Sunrise Bakery has survived its first year. Meera got the working-capital loan, the caterer eventually paid, and the flour became cakes. The bank now wants something different from a profit figure: it wants to know what the business owns and what it owes, as of today.

That is a balance sheet. Where the profit and loss statement in chapter 2 covered a stretch of time, this covers a single instant — one date, and the position of the business on that date.

It has three parts and one rule that never breaks:

• ▹**Assets** — everything the business owns or is owed.
• ▹**Liabilities** — everything it owes to others.
• ▹**Equity** — what would be left for the owners if you settled every liability with the assets.

And the rule: assets always equal liabilities plus equity. Not approximately — exactly. Every rupee of value the business holds came from somewhere, and it was either borrowed or it belongs to the owners. Here is Reliance's as at 31 March 2026.

4.2 — Current and non-current — the only split that matters

The bank's real question to Meera isn't "what do you own" — it's "can you pay me back next year out of what you'll have next year". Everything on a balance sheet gets sorted around answering exactly that.

Both sides are cut the same way, and it is the cut worth understanding before any of the individual lines.

• ▹**Current** — will turn into cash, or will have to be paid, within twelve months.
• ▹**Non-current** — everything with a longer horizon.

That single distinction answers the question a lender actually cares about: can this business meet what falls due in the next year, out of what it will have in the next year? Compare current assets against current liabilities and you have the beginning of an answer.

Current assets of ₹5,94,249 crore against current liabilities of ₹5,41,254 crore. Dividing one by the other gives about 1.1 — the current ratio, and roughly the amount of short-term resource available for each rupee of short-term obligation.

4.3 — Where chapter 3's problems are recorded

In chapter 3 we watched Meera's ₹6 lakh profit disappear into an unpaid caterer and a storeroom of flour. Those were not abstractions. They are lines on the balance sheet, and here they are on a real one.

Receivables, inventories and payables together are working capital. The balance sheet shows their LEVEL on one date; the cash flow statement shows how they MOVED over a period. That is the relationship between the two documents, and it is worth holding on to: the same three items, seen as a photograph and as a film.

Notice something on those numbers. Reliance owes suppliers ₹1,58,842 crore and is owed ₹58,491 crore by customers. It is holding roughly ₹1 lakh crore of other people's money at any moment, simply because it pays later than it gets paid. That is not sharp practice; it is scale, and it is a genuine and often overlooked source of funding.

4.4 — The assets that are not earning yet

Sunrise Bakery is halfway through building a second kitchen. Right now it's just a pile of spent money sitting on the balance sheet, earning nothing, waiting to become useful. Reliance has the exact same thing, just with nine more zeros.

On the non-current side, the largest line is the physical business itself.

Capital work in progress deserves attention because it is invisible in most summaries. It is money already spent on assets that are not finished. It sits on the balance sheet earning nothing, and it does not depreciate, because depreciation only starts when an asset is put to use.

Why it matters for reading returns: a company partway through a large build carries the cost of that build in its asset base while earning nothing from it. Return on capital looks worse than the operating business deserves. When the asset comes on stream, the same ratio improves without anything about the underlying business changing. A large CWIP figure is a reason to be careful about judging returns on one year alone.

4.5 — Owned money and borrowed money

The other side of the sheet answers where the ₹21,78,140 crore came from. Two sources, and the distinction is the most consequential one on the page.

Look at the first two lines together. Share capital — the money shareholders originally put in — is ₹13,532 crore. Other equity, which is overwhelmingly profits the company kept rather than paid out, is ₹8,90,498 crore. The retained earnings are roughly sixty-six times the original capital.

That is what a long-lived profitable company looks like from the inside. Almost none of the shareholders' stake is money anyone handed over; nearly all of it is profit that was earned and reinvested.

Meera and Arjun each put in ₹3 lakh to start Sunrise. If the bakery earns and retains ₹6 lakh a year for a decade, their share capital is still ₹6 lakh and their equity is over ₹60 lakh. The first number never changes. The second is the business.

Borrowings, at ₹2,70,751 crore long-term plus ₹1,03,670 crore short-term, sit against ₹10,85,866 crore of equity — a debt-to-equity ratio of about 0.35. Module 2 covers what that ratio means and, more usefully, what it does not.

4.6 — The date problem, again

Chapter 3 warned that cash flow is filed half-yearly while profit is filed quarterly. The balance sheet has the same characteristic, and on a company page you can see it directly.

So any ratio mixing a profit-and-loss figure with a balance-sheet figure — return on equity, return on capital, debt to equity against earnings — is combining two different dates. That is unavoidable and it is what everybody does, including us. It is simply worth knowing, particularly for a company that has raised money, repaid a large loan or completed an acquisition between the two dates.

4.7 — Where this sits on EquityTale

Every company page carries the filed balance sheet under Full financials, and a Balance sheet pillar in the Health Score built from debt to equity, interest cover and the current ratio.

Reliance scores 41.8 out of 100 on that pillar — a middling rank, not a warning. It is a percentile against every other company we score, and a large capital-heavy business carrying real borrowings will rarely rank near the top of a measure that rewards having little debt. What the pillar cannot see is the ₹1,92,287 crore of capital work in progress sitting in those assets and earning nothing yet, which is exactly the sort of context section 4.4 argues you should read alongside any single number.

Sunrise Bakery, meanwhile, has one oven, some flour, a loan and two owners. Next chapter we look at which part of a business actually earns the money — because by their third year, Meera and Arjun are selling cakes, wedding catering and a small line of packaged biscuits, and only one of the three is worth doing.