 The
Balance Sheet - Liabilities
The
Balance Sheet shows on the
left-hand side is the firm's assets or how much money the
company has, while the
right-hand side is the firm's liabilities and equity or
how much it owes, and what is left for the
stockholders.
The
Balance Sheet provides a
snapshot of the financial condition of the firm at a
particular time. Its also shows you the
value of the stuff the company owns, the creditor or
figure of debt,
how much stock is in their warehouse, and
how much money the firm has to work with in the
short period. It is generally
the first report you want to look at when valuing a
company.
Every
balance sheet is divided into three main parts - assets,
liabilities, and shareholder equity.
The
difference in assets and liabilities is the net worth of
the firm, also called stockholders’ equity.
Liabilities
are the opposite of assets. They are anything
that costs a
company money. Liabilities include
accounts payable, dividends and interest payable,
long-term debt, deferred income taxes, and any bonds
the company has issued.
Current
Liabilities
are the debts a company owes which must be paid within
one year. They are the opposite of current assets.
They normally consist of: -
Accounts
Payable is the
opposite of account receivable. It arises when a company
receives a product or service before it pays for it.
Accrued
Benefits or
Payroll is money owed to employees as salary and bonus
that the company has not yet paid.
Short
Term and Current Long Term Debt
these items are sometimes referred to as notes payable.
Working
Capital =
Current Assets - Current Liabilities
Long-term
Liabilities
-
Long-term bonds
-
Long-term debt
-
Deferred income taxes
Shareholder Equity
is the difference between assets and liabilities; it
tells you the “book value”, or what is left for the
stockholders after all the debt has been paid.
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