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This Balance SHEET shows the assets and liabilities of XYZ Corporation at the time of Dec 31st. The Assets on this sheet include the value of the shares of XYZ Corporation, which in turn is based on the share price then held by the shareholders as their share capital. Similarly, the Liabilities are shown by the dollar amount that the business would be required to pay in the event of insolvency in the event that the balance sheet is examined. The owner s equity is shown when the Equity is positive. If equity is positive, the owner has more money to pay and the business is healthier and could withstand the event of insolvency. Therefore, this is the time when an owner must be extra careful and diligent lest they not recover in the event of the insolvency. The owner s risk is shown in the cash position. If cash is negative, then the business cannot survive. Cash is positive if assets are higher than liabilities. When the cash balance is negative, the owner is most likely a debtor company. When the ownership changes hands from the shareholders to investors, their liability is converted to equity. Note that the cash is not negative until the owner decides to sell the assets to satisfy debt, or it is the result of insolvency proceedings. This is a good rule of thumb in case of insolvency. The equity is shown when the Equity is positive. If equity is positive, the business can pay the owners of the firm and creditors will be paid in full. In this case, the owners and creditors are protected from a future collapse of the business. When the Equity is negative, the business can not pay, is bankrupt or is insolvent.