The Companies' Balance Sheets

The Companies' Balance Sheets

The Companies' Balance Sheets

All companies' balance sheets are basically alike in that they are expressions of the same general facts, which constitute any balance sheet's 'meaning', as explained in the previous webpage . There are, however, differences in the form of presentation. Thus, in some cases, although the traditional form of the balance sheet, illustrated above, is preserved the 'Current Liabilities' are not entered in the normal position on the left-band, Liabilities' side, but are shown immediately below the 'Current Assets' on the right-band side. The reason for this is to facilitate the subtraction of 'Current Liabilities' from 'Current Assets', thus illustrating the 'Net Current Assets' at a glance.

A more modem form of presenting the balance sheet, adopted

by many companies, gives the net total assets and then how these are financed. In such cases the structure will be a list of the Current Assets less Current Liabilities, thus showing Net Current Assets at a glance; next are added the remaining assets. Following this are the words 'Financed by' and then comes a list of the items financing the assets (the company's permanent, bug-term and medium-term liabilities). The balance sheet will thus appear as follows:

CONSOLIDATED BALANCE SHEET

ASSETS LESS CURRENT LIABILITIES Current assets .......................... Deduct

Current liabilities

Net current assets ........................

Add

Trade * ......................

Fixed assets ............................

Goodwill ..............................

FINANCED BY Share capital Reserves ..............................

Loan capital

Future taxation........................

Minority interests ......................

It is now proposed to interpret the meaning of each item in the consolidated balance sheet, and its value from your point of view as an investor. Later it will be possible to indicate the signs to be detected to enable you to assess the investment standing of the company's shares.

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