BS is a snapshot of the company's financial position at a single point in time.
Also known as "Statement of Financial Position", or "Statement of Net Worth"
Three segments: (1) Assets, (2) Liabilities, and (3) Equity
[ Assets = Liabilities + Equity ]
[ Net Worth = Assets - Liabilities ]
* Assets are what the company uses to operate its business
* Liabilities and equity are the two sources that support these assets
* Owners' equity, referred to as shareholders' equity in a publicly traded company
* Equity is the amount of money initially invested into the company plus any retained earning,
and represents a source of funding for the business.
* Assets organized from most liquid to least liquid
* Liabilities organized from short to long term borrowing and other obligations
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| Assets | Liabilities |
| | |
| | |
| | |
| | Shareholders' |
| | Equity |
| | |
| | |
| XXX | XXX |
------------------------------------------------------------
Type of Assets: ( assets = display what company owns )
(1) Current Assets
* have a life span one year or less, meaning they can converted into cash easily
* it is included cash and cash equivalents, account receivable, and inventory
(2) Non-Current Assets
* assets that are not easily turned into cash (have a life span more than one year)
* tangible assets such as building, land and machinery
* intangible assets such as value of brand, goodwill, patent and copyright
Type of Liabilities: ( liabilities = display what company owes to outside parties )
(1) Current Liabilities
* the company's liabilities which will come due, or must be paid within one year
(2) Long-Term Liabilities
* the debt and non-debt obligations, which are due after a period of at least one year
from the date of the balance sheet
Shareholders' Equity ( Represent a company total net worth )
* SE is the initial amount of money invested into a business.
* If, at the end of the fiscal year, a company decides to reinvest its net earning into
the company (after tax), these retained earning will be transferred from the income
statement onto the balance sheet into the SE account
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Techniques to analyze BS
* Financial ratio analysis uses formula to gain insight into company and its operation
* Note that some ratios will need information from more than one financial statement,
such as from the BS and IS
* Read More about Financial Ratio
Read More
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