Bank Balance Sheet Bank Balance Sheet Examples Bank Balance Sheet Practice Problems Central Bank Balance Sheet Definition Long Term Bank Balance Sheet
Most Popular This Week
Purpose of a Balance Sheet The balance sheet boldly declares where a business stands at a given moment in time. From the balance sheet a financially sophisticated reader can learn an immense amount of valuable information about a business and its viability. That is why potential investors and lenders will almost always ask you for a copy of your financial statements including the balance sheet income statement statement of retained earnings and statement of cash flows. This is also why you as a savvy entrepreneur need to understand the information presented on them. Why It Is Important The principal reason your business s balance sheet is so important to you and to any potential investors or lenders is that it is like a photograph of your business.
Your assets are tangible items such as cash inventory buildings land and equipment as well as investments prepaid expenses and money owed to you (accounts receivable notes receivable etc.) On a balance sheet assets are listed in groups based on their liquidity. Liquidity is a measure of how quickly these assets can be converted into cash sold or consumed. Current assets - assets that one can reasonably expect to be converted into cash within a year (e.g. accounts receivable) or can be converted into cash on demand (e.g. stocks) are listed first on the left-hand side and then totaled. Fixed assets follow next - fixed assets are expected to be around a while and persist - these include buildings vehicles and equipment. Finally total assets are added-up at the bottom of the assets section of the balance sheet. Liabilities reflect all the money your business owes out to others.
Most Popular This Week
They are the positive side of your Balance Sheet but the real picture of how much gold you have in your Fort Knox is your Net Worth. So just as important to your Balance sheet is your Liabilities. The total of your Liabilities is subtracted from the total of your Assets to give you your Net Worth. You fill out your Balance Sheet and total up your Assets and Liabilities. You subtract the total of your Liabilities from your Assets. That number your Net Worth will come out to either a negative amount an amount of or near to zero or it will be substantially positive. These are the only 3 scenarios possible. • If your net worth is a minus number you are not managing your financial resources properly. Your Balance sheet is your report card and you are failing. It is that simple.