Company A and Company B have experienced different changes in their assets, liabilities, and owner’s equity over the past three years. For example, as shown in Figures 1 and 2 below, Company A’s total assets and total liabilities both increased significantly from 2017 to 2019. Meanwhile, Company B experienced significant decreases in both its total assets and total liabilities from 2018 to 2019.
These differences can be explained by the companies’ respective strategies for managing their finances. For example, it appears that Company A has been actively investing capital into its operations by gradually increasing its assets while accumulating more debt through additional loans or lines of credit. On the other hand, Company B appears to have pursued an opposite strategy of reducing its overall financial risk by decreasing its asset holdings while simultaneously repaying existing debt obligations.