Assets and liabilities are two key components of a company's balance sheet, which is a financial statement that provides a snapshot of the company's financial position at a given point in time. Assets are resources that a company owns and expects to generate economic value from, such as cash, investments, and property. Liabilities are obligations that a company owes to others, such as loans, rent, and taxes.

The relationship between assets and liabilities can be understood through the accounting equation, which states that a company's assets are equal to its liabilities plus equity. This equation can be expressed as: Assets = Liabilities + Equity. In other words, a company's assets are financed through a combination of liabilities (debt) and equity (contributed capital). When a company incurs a liability, it uses up some of its assets to pay for it. Conversely, when a company acquires an asset, it either uses its existing assets or incurs a liability to pay for it. Understanding this relationship between assets and liabilities is important for evaluating a company's financial health and risk profile.

Assets and liabilities are two fundamental components of a balance sheet, representing a business's financial position. Assets are resources a company owns or controls that provide future economic value—examples include cash, inventory, real estate, and equipment. Liabilities, on the other hand, are obligations a company owes to others, like loans, accounts payable, and mortgages.

The relationship between assets and liabilities is often expressed in the accounting equation: **Assets = Liabilities + Equity**. This equation highlights that a company’s assets are funded by either its debts (liabilities) or its owner’s equity (the residual interest). A healthy balance between assets and liabilities helps maintain financial stability. Excessive liabilities compared to assets can signal financial risk, while high assets relative to liabilities indicate strong financial health and potential for growth.