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    How To Read A Balance Sheet

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    Pratik Bhatt
    The balance sheet provides a snapshot of a company's financial position by measuring assets, liabilities, and shareholder's equity. Assets are things owned that are either cash or can be converted to cash within a year. Liabilities must be paid within a year or the company's operating cycle. Various ratios are used to analyze the company's liquidity and efficiency, such as current ratio, quick ratio, and accounts receivable turnover, with higher ratios generally indicating a more stable financial position. The balance sheet, along with income statement and cash flow statement, gives investors a complete picture of the company's performance and financial health.

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    How To Read A Balance Sheet

    Uploaded by

    Pratik Bhatt
    64 views2 pages
    The balance sheet provides a snapshot of a company's financial position by measuring assets, liabilities, and shareholder's equity. Assets are things owned that are either cash or can be converted to cash within a year. Liabilities must be paid within a year or the company's operating cycle. Various ratios are used to analyze the company's liquidity and efficiency, such as current ratio, quick ratio, and accounts receivable turnover, with higher ratios generally indicating a more stable financial position. The balance sheet, along with income statement and cash flow statement, gives investors a complete picture of the company's performance and financial health.

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    How to Read a Balance Sheet

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    The balance sheet provides a snapshot of a company's financial position by measuring assets, liabilities, and shareholder's equity. Assets are things owned that are either cash or can be converted to cash within a year. Liabilities must be paid within a year or the company's operating cycle. Various ratios are used to analyze the company's liquidity and efficiency, such as current ratio, quick ratio, and accounts receivable turnover, with higher ratios generally indicating a more stable financial position. The balance sheet, along with income statement and cash flow statement, gives investors a complete picture of the company's performance and financial health.

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    64 views2 pages

    How To Read A Balance Sheet

    Uploaded by

    Pratik Bhatt
    The balance sheet provides a snapshot of a company's financial position by measuring assets, liabilities, and shareholder's equity. Assets are things owned that are either cash or can be converted to cash within a year. Liabilities must be paid within a year or the company's operating cycle. Various ratios are used to analyze the company's liquidity and efficiency, such as current ratio, quick ratio, and accounts receivable turnover, with higher ratios generally indicating a more stable financial position. The balance sheet, along with income statement and cash flow statement, gives investors a complete picture of the company's performance and financial health.

    Copyright:

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    Balance Sheet

     A balance sheet is a snapshot of a company's financial position at a


    particular point of time in contrast to an income statement, which
    measures income over a period of time.

     A balance sheet measures three kinds of variables: assets, liabilities and


    shareholder's equity.

    Assets = Liabilities + Shareholder's equity.

    Current Asset

     Current asset on the balance sheet is something which can either be


    converted to cash or used to pay current liabilities within 12 months.

    Current Liabilities

     Current liabilities are liabilities of the business that are to be settled in


    cash within the fiscal year or the operating cycle of a given firm

    Total Asset

     Shareholders equity, Retained Earnings, Other Liabilities.

    Ratios

    Current Ratio

    Current Ratio = Current Asset / Current Liabilities

     Normally Current ration greater than 1.5 or more is sufficient to fullfill near
    term operating needs.

    Quick ratio

    Quick ratio = Current Asset-Inventories / Current Liabilities


     Normally Quick ration greater than 1 is sufficient to fulfill near term needs.

    Cash Ratio

    Cash Ratio = Cash / Current liabilities

    Working Capital = Current Asset- Current liabilities

     WC can be positive or negative. It basically shows how much liquid assets


    the company currently has to build the business.

    Enterprise vale /Share Holders equity (EV/SE)

    Shares Outstanding *Price +Debt – Cash


    _________________________________
    Share Holders Equity

    Account Receivables turnover

    A/R turnover = Sales for Period/Average A/R for period

    Inventory Turnover

    Inventory Turnover = COGS/Average inventory for the period

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