{"id":2217,"date":"2018-08-02T10:49:40","date_gmt":"2018-08-02T15:49:40","guid":{"rendered":"http:\/\/35.227.21.112\/?p=2217"},"modified":"2022-11-29T16:41:03","modified_gmt":"2022-11-29T21:41:03","slug":"the-typical-balance-sheet","status":"publish","type":"post","link":"https:\/\/lions.financial\/hi\/the-typical-balance-sheet\/","title":{"rendered":"The Typical Balance Sheet"},"content":{"rendered":"
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The Typical balance sheet:<\/h3>
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Typically, a Balance Sheet is divided into three main parts:<\/p>

1. Assets:<\/strong> Current assets are those that can be converted into cash within one year. They typically include<\/span><\/p>

cash, stocks, accounts receivable, prepaid expenses, and inventory. Fixed assets are tangible assets that
are for long-term use, such as equipment, machinery, vehicles, land and buildings, furniture and fixtures,
and leasehold improvements. Many other assets don\u2019t fit within either of these categories so most
balance sheets include an \u201cother assets\u201d category for these items \u2014 typically things like long-term
investment property, life insurance cash value, and compensation due from employees.<\/p>

2. Liabilities:<\/strong> Current liabilities are business obligations due within one year. These typically include
short-term notes payable (including lines of credit), current maturities of long-term debt, accounts
payable, accrued payroll and other expenses, and taxes payable. Long-term liabilities are business
obligations that are due outside of one year, such as any bank debt or shareholder loans with maturities
longer than one year.<\/p>

3. Owner\u2019s equity:<\/strong> This is the sum of all shareholder money invested in the business and accumulated
business profits. Owner\u2019s equity includes common stock, retained earnings, and paid-in-capital.<\/p>

How to Use the Balance Sheet<\/strong>
Your balance sheet can provide a wealth of useful information to help improve financial management. For
example, you can determine your company\u2019s net worth by subtracting your balance sheet liabilities from
your assets, as noted above.<\/p>

Perhaps the most useful aspect of your balance sheet is its ability to alert you to upcoming cash flow
shortages. After a highly profitable month or quarter, for example, business owners sometimes get lulled
into a sense of financial complacency if they don\u2019t consider the impact of upcoming expenses on their
cash flow.<\/p>

There are two easy-to-figure ratios that can be computed from the balance sheet to help determine
whether your company will have sufficient cash flow to meet current financial obligations:<\/p>