Balance sheet

Balance sheet

• reports a company's assets, liabilities and shareholders' equity at a specific point in time
• i.e., a snapshot of what a company owns and owes, as well as the amount invested by shareholders
• Formula
• Assets=Liabilities+Shareholders’ Equity
• a company has to pay for all the things it owns (assets) by either borrowing money (taking on liabilities) or taking it from investors (issuing shareholders' equity)
• Assets
• listed from top to bottom in order of their liquidity
• i.e., the ease with which they can be converted into cash
• Current assets
• Case and case equivalents
• e.g., hard currency (e.g., $), treasury bills, short-term certificates of deposit (i.e., CD)
• Marketable securities
• e.g., common stocks, treasury bills, etc.
• Accounts receivables
• Inventory
• Prepaid expenses
• e.g., insurance, advertising contracts or rent
• Non-current or long-term assets
• i.e., will not or cannot be liquidated in the next year
• Fixed assets
• e.g., land, machinery, equipment, buildings
• Intangible assets
• e.g., intellectual property and goodwill
• Liabilities
• Current liabilities
• due within one year
• e.g., bank indebtedness, interest payable, wages payable, customer prepayments, dividends payable, accounts payable, current portion of long-term debt
• Long-term liabilities
• due at any point after one year
• e.g., interest and principal on bonds issued, pension fund liability (i.e., pay into employees' retirement accounts), deferred tax liability
• Shareholders' equity
• i.e., the money attributable to a business' owners (i.e., net assets)
• Retained earnings
• i.e., the amount of net income left over for the business after it has paid out dividends to its shareholders
• Treasury stocks, etc.