Walk me through a balance sheet?



Current Assets (expected to be converted into cash annually) – line items

• Cash & Cash equivalents - Cash held in the bank in deposits or low risk short-term investments.

• Marketable Securities - Short-term debt or equity investments.

• Accounts receivable – Money owed to the company by customers who have purchased goods.

• Inventories – Represent the money invested by the company in unfinished or finished goods which are still to be sold.


Long term or Non-Current Assets – Key line items

• Property Plant & Equipment – Any long-term investments made by the company relating to the operations of the business such as equipment, plants, building, vehicles etc.

• Intangible assets/Goodwill – Intangible assets such as brands, trademarks etc acquired by the company.

• Deferred Taxes assets– Potential future tax savings due to excess tax paid historically. This is the difference between tax paid on the financial statements and the actual taxes paid.

• Other Assets – These are assets which are not included in the above-mentioned line items, including prepaid expenses and long-term investments among others.


Liabilities – Key line items

• Accounts payable – Money that the company owes to its suppliers for the goods/service purchased.

• Notes Payable – These are the primarily short-term borrowings.

• Long term (LT) debt– This the company’s debt which has a maturity of more than 12 months.

• Current portion of LT debt – The proportion of LT debt that is payable within the next 12 months.

• Deferred taxes – Future tax obligations arising due to the company paying lower taxes then what is measured by its financial statements.

• Minority interest– Equity component of the proportion of consolidated business not owned by the company.


Shareholders’ Equity

• Preferred stock – Stocks that have priority over common shareholders and have special rights.

• Common shareholders’ equity – This is the par value of units of ownership of a corporation.

• Additional paid in capital (APIC) – The value of shares when it is sold above its par value.

• Treasury Stock – These are shares which were first issued but later bought back by the company.

• Retained Earnings –Cumulative net income of the company since inception less dividends and losses.


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