The balance sheet is the maximum documentSimplified, built so that it was understandable to the general public. In fact, you do not even need to understand the difference between a debit and a loan in order to get all the necessary information from the balance sheet. Therefore, they are afraid and even more ignore it is not worth it.
It is the balance sheet that serves as the basis forthe adoption of critical management decisions, as in it, as in an open book, you can see all the advantages and disadvantages of a particular enterprise. On the basis of the balance sheet, dozens of the most important economic indicators are calculated. The value of the balance sheet can not be overemphasized. Therefore, take it in your hands right now and begin the study.
The first thing that catches your eye isdivision of the balance into two major parts: assets and liabilities. This division has a very deep meaning. Imagine it like this: assets reflect everything that the company currently owns (money, equipment, raw materials, finished products, etc.), and liabilities indicate how the enterprise could acquire these assets. In total, there are two ways of acquiring: at the expense of shareholders and borrowed funds. In accordance with this logic, all liabilities are divided into capital and debt obligations. As you can see, everything is quite simple, and now we turn to the consideration of the balance sections directly.
In total, the balance sheet has five sections,of which two relate to assets and three to liabilities. In the first section, non-current assets are displayed. A little simplifying, we can say that they include everything that the company will use for a year or more. This, of course, is production equipment, intangible assets (licenses and patents of all kinds), unfinished construction (or rather investments in it), etc. This section shows the company's long-term prospects in making a profit.
The second section, current assets, it's cashfunds, goods in stock, raw materials and materials, as well as various debts of economic entities to the company, which will be extinguished within a year. This section gives us information about how the business is at the moment, and whether it will be able to cope with all of its current obligations.
The third section, which includes the accountingbalance, capital - is, as already stated, the shareholders' funds. The share of shareholders can be in the form of cash investments (contribution to the statutory fund, purchase of shares, etc.), and in the form of retained earnings left to work for business needs. This section is especially interesting for investors, since it actually reflects the economic effect (profit) of the work of the enterprise and the profitability of investments.
The balance of the debtliabilities divided into long-term (for more than a year) - the fourth section, and short-term - the fifth section. These sections allow you to determine how much the enterprise is "bogged down in debt" and whether it will be able to pay off in time with all its obligations. Usually on these sections banks and financial institutions concentrate their attention.
Thus, the balance sheet, its structureand content is not anything complicated. You do not need to learn the accounting entries to determine the economic efficiency of the company, its liquidity, debt load, return on investment and other key indicators. In fact, the experienced leader has a brief look at the balance to get an answer to all his questions. After a certain training, it will definitely work for you.
