Understanding a business can be tough but it is nearly impossible if one can't read financial statements. This article will go over the basics of a balance sheet.
Current liabilities are claims on resources other than those that the owners of the company have. They come due in under a year. Each of them is summed and then the balance sheet moves on to long term liabilities. Just like long term assets they last for more than a year.
Long term assets come next. They are assets that are unlikely to be used up in a year. Things like factories go here. After the long term assets all are totaled.
Stockholders' equity is simply what is left over for the owners after all other claims. Here one sees contributed capital and retained earning. Retained earnings are those the company didn't pay as dividends.
The first subheading for a balance sheet is the assets column. Under this are the current assets of the company. Assets are simply resources used to create earnings power. Current assets are those that will be used in one year. Current assets include things like receivables and cash. As one would expect both of these can be drawn in rather quickly. After the list of individual asset accounts is their sum.
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