Balance Sheets Flashcards
What does a balance sheet report
- The company’s assets
- Liabilities
- Shareholders equity
Snapshot of what a company owns and owes as well as the amount invested by shareholders
How do you calculate the assets in a balance sheet
Assets = Liabilities + Shareholders’ equity
What ratios can be calculated from a balance sheet
- Debt to equity ratio
- Acid test ratio
How are assets set out in a balance sheet
Top to bottom in order of liquidity - the ease with which they can be converted into cash.
Generally what categories of assets are listed in what order on the balance sheet
- Cash and cash equivalents
- Marketable securities
- Accounts receivable
- Inventory
- Prepaid expenses
What are marketable securities
These are equity and debt securities for which there is a liquid market
What are accounts receivable
Refers to money that customers owe the company, perhaps including an allowance for doubtful accounts since a certain proportion of customers can be expected not to pay
What are prepaid expenses
Represents the value of things that have already been paid for like insurance and advertising contracts and rent
What are some long term assets that can’t be paid off easily
- Long term investments
- Fixed assets
- Intangible assets
What are examples of fixed assets
- Land, machinery, equipment, buildings and other durable, generally capital intensive assets
What are examples of intangible assets
- Non physical assets like intellectual property and good will
- usually only listed if acquired and not developed in house
Careful as then these can be wildly over or undervalued in a balance sheet
What are liabilities
Money that the company owes to outside parties
What are some examples of liabilities
- Bills that the company has to pay suppliers
- Interest on bonds it has issued to creditors
- Rent
- Utilities
- Salary and a lot more
What are current liabilities
Due within one year and these are listed in order of their due date
How are current liabilities listed in the balance sheet
Listed in the order of their due date.
What examples of current liabilities are there
- Current portion of long term debt
- Bank indebtness
- Interest payable
- Wages payable
- Customers prepayments
- Dividends payable and others
- Earned and unearned premiums
- Accounts payable
What examples of long term liabilities are there
- Long term debt
- Pensoion fund liability
- Deferred tax liability
What is pension find liability
The money a company is required to pay into its employees retirement accounts
What is shareholders’ equity also known as
Net assets
What is shareholders equity
The money attributable to a business’ owners, meaning its shareholders
What are retained earnings
The net earnings a company either reinvests in the business or uses to pay off debt; the rest is distributed to shareholders in the form of dividends
What is the treasury stock of a company
This is the stock that a company has repurchased - it can be sold at a later date to raise cash or reserved to repel a hostile takeover.
What is preferred stock
This is listed separate from common stock under shareholders equity Not quite sure what this really is
What is additional paid-in capital or capital surplus
The amount that shareholders have invested in excess of the common and preferred stock accounts which are based on the par value rather than the market value.
