What does a balance sheet tell you

what does a balance sheet tell you

Company Assets

The balance sheet shows the nontangible and tangible items that make up the company's value. The assets on the balance sheet that are tangible include "physical" items that you can see. For example, any inventory that is used to create company products, equipment used in manufacturing or buildings are considered assets on the balance sheet. Cash is included in this list of physical assets owned by your company. Additionally, any intellectual property (intangible assets) developed by your company in the form of patents, copyrights or trademarks is calculated in the assets. Intangible items are given an estimated value.

Company Liabilities

Company liabilities can be thought of as "debts" on the balance sheet. The balance sheet shows what your company owes to others in the form of cash, goods or services. Any loans that your company takes

from a bank or financier are considered liabilities, as are outstanding sums owed to suppliers or building owners. Future liabilities that your company owes include payroll to employees and estimated material costs for producing your product. If your company has investors, any dividends that you pay during the year are included in this total.

Shareholder's Equity

Shareholder's equity -- if your company has shareholders -- is calculated as the money that would be left over if you sold all of the tangible and nontangible assets the company owned and settled outstanding liabilities. Company stocks are usually based off of shareholder's equity, and dividends -- monetary increases of shareholder's equity over a given period -- can be paid to shareholders on a recurring basis. On the balance sheet, you usually list the outstanding shares of stock or equity owed.

Source: www.ehow.co.uk

Category: Forex

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