Balance Sheets Analyzing Assets, Liabilities, & Equity.

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Presentation transcript:

Balance Sheets Analyzing Assets, Liabilities, & Equity

What is a Balance Sheet? A statement that shows what the business owns (assets) versus what it owes (liabilities).

Factors that are addressed in an Balance Sheet  Assets – Items of value that a business owns.  Liabilities – Debts owed by a business.  Owner’s Equity – A value placed on a company based on the amount of assets owned and liabilities owed.

Assets  Land  Equipment  Cash  Buildings  Inventory

Liabilities (Current or Long-Term)  Loans  Mortgages  Accounts Payable  Notes Payable  Anything owed that will be paid off over time.

Owners Equity (Net Worth) The difference between the total value of assets & liabilities. Assets – Liabilities = Owner’s Equity Net Worth or Value of Company

Purpose of a Balance Sheet is to provide a current snapshot of a company Unlike an income statement that is a summary of revenues & expenses paid in the past over a specified time a balance sheet shows the current status of a company by providing a current snapshot

Real-Life Example that illustrates the concept of a Balance Sheet  You own a car  You owe $10,000 on your car loan (Liability)  The value of your car is $15,000 (Asset)  The owner’s equity that you own is $5,000 ($15,000-$10,000 = $5,000)