A balance sheet is a snapshot of a company’s assets, liabilities and equity at a given point in time. It endeavors to solve the basic accounting equation: assets should equal liabilities plus shareholders’ equity.
Assets include cash and cash equivalents, as well as marketable securities and accounts receivable. Liabilities cover everything from short-term debts to corporate bonds and mortgage payments.
Assets
The left side of the balance sheet contains your practice’s assets, which are concrete items that have monetary value like inventory, property and equipment. It also includes marketable securities and money owed to you by payers (accounts receivable). Other non-physical assets are often included as well, such as patents held or trademarks.
The right side of the balance sheet details your practice’s liabilities and equity. The basic equation is Assets = Liabilities + Ownership Equity. Different accounting systems and methods can influence these figures, so be careful to review the footnotes to see how the numbers were calculated.
The purpose of a balance sheet is to provide a snapshot of your practice’s financial health at a single moment in time. It is one of three core financial statements, along with the income statement and cash flow statement, used for evaluating the performance of your business. Compare your current reporting period to previous periods to identify trends.
Liabilities
The liabilities side of the Bilanz Hattingen includes anything owed to outside parties that must be paid back. They include debts, tax liabilities and other financial obligations. These accounts are typically categorized by their due dates. Those that are expected to be paid within one year are classified as current liabilities, while those that will be settled after a year or more are considered long-term liabilities.
The Balance sheet shows your practice’s assets on the left and its liabilities and shareholders’ equity on the right. The totals on both sides must match each other to be balanced. The line items on the left-hand side of the balance sheet reflect everything your practice owns that has monetary value, such as cash and cash equivalents, investments, property and equipment, marketable securities and money owed to you by payers (accounts receivable). The other column reflects your practice’s debt, taxes, wages and salaries. Also included are intangible assets, such as patents and trademarks held.
Shareholders’ Equity
A company’s shareholders’ equity is the difference between a firm’s total assets and its total liabilities. The statement of shareholders’ equity reports the changes in a company’s equity during an accounting period. It displays the equity at the beginning of the period and then adds or subtracts the following components: contributed capital, preferred shares, treasury stock, retained earnings, and accumulated other comprehensive income.
The statement of shareholders’ equity also includes a section that shows the movement in a company’s share capital. This is important because it indicates whether a company’s investors are making money or losing their investments. This figure, along with a company’s debt ratios, book value of equity, market capitalization, and earnings per share, can help investors identify a good investment opportunity. In addition, it can indicate a company’s financial strength and stability. In the case of liquidation, common stockholders are paid first, followed by bondholders and preferred shareholders. In the long run, a stable shareholders’ equity can help a company avoid bankruptcy.
Ratios
A balance sheet is a snapshot of what a company owns and owes at a given point in time. It adheres to the equation of assets = liabilities + shareholders’ equity.
There are a variety of techniques that can be used to analyze the information contained in a balance sheet. The most common is financial ratio analysis, which uses formulas to gain insight into a company’s condition and operational efficiency.
Liquidity ratios, such as the current and quick ratios, compare a company’s current short-term assets to its current liabilities to assess whether it can meet its short-term commitments. Activity ratios, which focus on the company’s operating cycle, include debt-to-equity and working capital ratios.
A low debt-to-equity ratio indicates that a company is using its own cash and not borrowing to finance operations, which can help limit the risk to shareholders. Another important metric is the days-sales-sold (DSS) ratio, which measures how long it takes for a business to convert its accounts receivable into cash.