Avondale Asset Management Looking At The Swiss National Banks The Bulk Of The Buying Has Been Of Eur Which Now Represents 56 Of The Currency Reserves Or 42 Of
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There may be an offsetting liability. For a house it would be the mortgage or any other debt secured against the home. For a car it would be a car loan. The difference between the value of the house or car and what is owed is the equity in that particular investment. This is like a net worth for that particular asset. There are appreciating assets and depreciating assets. A home is generally an appreciating asset over the long term. In recent times we have learned that in the short term a home can lose its value rather quickly. However most housing markets recover in the long term and a home should appreciate over time.
On the other hand long-term assets which can include land inventory and equipment are paid off and will benefit the company over an extended period of time. Accumulative depreciation is used on balance sheets to explain how the cost of long-term assets are "used up" during the process of running a business. The cost is spread over the life of the asset. For example say a piece of machinery cost $50 000 and the useful life of the machine is 20 years therefore in the first year the accumulative depreciation for the equipment is $2 500. Liabilities can simply be explained as the amounts owed to other organizations such as the transfer of assets or services that need to be provided. Liabilities are also made up of current and long-term.
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Why Small Businesses Are Different If you are a small business owner or entrepreneur then you need to be able to read and understand your balance sheet because first it is through your financial statements and other numerical data that you collect that you really get to know your business. Michael Gerber the best selling author of the E-Myth Revisited says it much better than I ever could as "because without the numbers you can t possibly know where you are let alone where you re going. With the numbers your business will take on a totally new meaning. It will come alive with possibility." The very first step you will ever take down that road to really knowing your business is through examining and understanding your own balance sheet.