Understanding the Balance Sheet
Item Amount
Liabilities
A. Short Term Liabilities
B. Long Term Liabilities
C. Capital / Net Worth
Total Liabilities (A+B+C)
Assets
D. Current Assets
E. Fixed Assets
F. Non Current Assets
G. Total Assets (D+E+F)
Item Amount
Liabilities
A. Short Term Liabilities
B. Long Term Liabilities
C. Capital / Net Worth
Total Liabilities (A+B+C)
Assets
D. Current Assets
E. Fixed Assets
F. Non Current Assets
G. Total Assets (D+E+F)
Analysing Financial Statements and Ratios
B/S Ratios we will learn about in this section
will lead us to ask the following questions.
 How do these figures compare with
past performance? What does the
trend reveal?
 What does the break-up of the item
reveal?
 How scientific and realistic are the
Current Year Estimates?
 Do we have the latest Audited figures?
Do they match with the provisional
figures we got earlier?
 What rationale are we applying to
make future projections?
 Working Capital Borrowings
 Overdraft Facility O/s
 Material purchased on credit
 Unpaid Expenses
 Taxes Payable
 Advance received from customers
 Instalments falling due for payment in
next 12 months
1
Credit Assessment
Item Amount  Term Loans (less next year
instalments)
Liabilities  Other long term funds availed

A. Short Term Liabilities

B. Long Term Liabilities

C. Capital / Net Worth

Total Liabilities (A+B+C)

Assets

D. Current Assets

E. Fixed Assets

F. Non Current Assets

G. Total Assets (D+E+F)

Item Amount  Balancing figure for difference between

assets and liabilities
Liabilities  Paid up capital
 Premium
A. Short Term Liabilities  Accumulated profits / losses
 Quasi equity
B. Long Term Liabilities

C. Capital / Net Worth

Total Liabilities (A+B+C)

Assets

D. Current Assets

E. Fixed Assets

F. Non Current Assets

G. Total Assets (D+E+F)

Analysing Financial Statements and Ratios 2

Credit Assessment
Item Amount  SB / CA Balances
 Fixed Deposits
Liabilities  Income receivable
 Raw Material stock
A. Short Term Liabilities  Semi – finished stock
 Finished Goods Stock
B. Long Term Liabilities  Trading Stock
 Stores, spares, consumables on hand
C. Capital / Net Worth  Advance Tax Paid
 Advance given to employees
Total Liabilities (A+B+C)  Advance paid to suppliers
Assets

D. Current Assets

E. Fixed Assets

F. Non Current Assets

G. Total Assets (D+E+F)

Item Amount

Liabilities

A. Short Term Liabilities

B. Long Term Liabilities

C. Capital / Net Worth

Total Liabilities (A+B+C)

Assets

D. Current Assets
 Present book value
E. Fixed Assets  Moveable and Immoveable Assets

F. Non Current Assets  Investment in shares, bonds,

G. Total Assets (D+E+F)
debentures
 Overdue income receivable
 Overdue advances to suppliers,
employees etc
 Long term loans given
 Long term advances
 Ernest Money / Security Deposit

Analysing Financial Statements and Ratios 3

Credit Assessment