Access over 20 million homework & study documents
search

The Balance Sheet Summary

Content type

User Generated

Subject

Accounting

Type

Discussion

Rating

Showing Page:
1/1
The Balance Sheet
The balance sheet is an overview of a company's financial position, and this information
is a very important determinant of a company’s finances. The content that is included on the
balance sheet (in broad terms) is typically the assets, liabilities, and shareholders’ equity at a
particular moment in time, and in fact the balance sheet is often referred to as a snapshot of an
organization's finances because of that fact (Lumen, n.d.). Knowing that the balance sheet only
provides information from a single moment in time, it is important to properly analyze the
balance sheet before making any important financial decisions, and special considerations should
be taken for some particular information found on the balance sheet. It is commonly said that
“numbers don’t lie” and looking at the numbers on the balance sheet can help to paint a clearer
picture of a company’s true financial position, as well as a possible financial position if a certain
change was to occur (Ross, 2021).
Regarding capital investments specifically, the items on the balance sheet that are the
most important to analyze include cash, accounts receivable, short-term investments, property,
plant, and equipment, and major liabilities (Ross, 2021). When looking at the balance sheet these
are the items that should be looked at first and foremost, prior to “pulling the trigger” on the
option to secure bond financing for the proposed renovation project. Along with simply looking
at the numbers, it is also important to analyze some specific ratios that are relevant to capital
structure as well. Some of these ratios include the debt ratio, the debt-to-equity ratio, and last but
not least the capitalization ratio (Loth, 2021). When it comes to understanding the value of the
balance sheet with regard to capital investments, looking at these specific ratios and these
particular items is a great place to start.
References
Loth, R. (2021, May 19). Analyzing a Company's Capital Structure. Retrieved from
https://www.investopedia.com/articles/basics/06/capitalstructure.asp
Lumen. (n.d.). Boundless Accounting. Retrieved from
https://courses.lumenlearning.com/boundless-accounting/chapter/the-balance-sheet/
Ross, S. (2021, May 19). The Main Focus Points When Analyzing a Balance Sheet. Retrieved
from
https://www.investopedia.com/ask/answers/050615/what-items-balance-sheet-are-most-i
mportant-fundamental-analysis.asp

Sign up to view the full document!

lock_open Sign Up

Unformatted Attachment Preview

The Balance Sheet The balance sheet is an overview of a company's financial position, and this information is a very important determinant of a company’s finances. The content that is included on the balance sheet (in broad terms) is typically the assets, liabilities, and shareholders’ equity at ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
Really useful study material!

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4