Apple Income Statement And Balance Sheet Pdf With Income Statement And Balance Sheet Practice Questions With Solutions Pdf Plus Income Statement And Balance
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For most of these kinds of items a company will book their value at whatever was paid for it. While items that depreciate like computers are usually de-valued over a period of time that piece of land will likely appreciate over time and the current value may not be reflected on the balance sheet. This can make the company more valuable than it appears (some value investors refer to these as "asset plays"). For financial companies a ton of assumptions are made on the balance sheet. The actual value of a loan is very difficult to calculate due to variable interest rates risk of default risk of early payment etc. Take that reality and multiply it by the millions of loans a large bank has outstanding and you begin to see why investing in banks is such a difficult and risky endeavor. However since the Magic Formula throws out financial stocks we won t discuss that in much detail here. One other thing to be generally aware of is that both assets and liabilities are categorized as either "current" or "long-term".
Second your balance sheet is how anyone that you will ever want to do business with will understand your business. Think about getting a loan the first thing your banker wants to see are your financial statements and the first page of your financial statements is your balance sheet. Why is it first? Perhaps because it is the most important. Now think about your situation; you re applying for a loan or a grant or you want to do business with the federal government or an investor is thinking about either coming on board or buying you out and you present your financial statements to them.
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The purpose of the balance sheet. The balance sheet s purpose is to provide a detailed listing of the company s assets and liabilities. It is not unlike a personal credit report. If you think about your own financial net worth you probably have a number of assets such as a home a vehicle a stock portfolio cash in a savings account and so forth. You also likely have a list of liabilities or debts such as a mortgage a car loan electric or telephone bills that have not yet been paid etc. This concept is directly analogous to a company and the balance sheet lists out all of these. Like the income statement an investor needs to be aware of the potential accounting assumptions made for the balance sheet. Obviously some line items are unambiguous. For example the worth of cash in the bank is a pretty straightforward value. However the worth of a 5 year old computer or an undeveloped piece of land are less concrete.