A Bilanz is a snapshot of the financial status of a company at a specific moment in time. It lists what a company owns (assets), what it owes to others (liabilities) and the amount of money its shareholders or owners have invested in the business (shareholder’s equity). It is also important to know that a balance sheet is based on past data, and that future performance cannot be predicted based on this information.
The first section of a balance sheet lists all the assets that a company owns. These assets are classified as either current or non-current. Current assets include cash and equivalents, marketable securities and accounts receivable. Non-current assets include long-term investments, machinery and equipment, and other tangible fixed assets that will not be liquidated within a year. These assets will often depreciate over time.
Next up are a company’s liabilities. These are categorized as either current or long-term. Current liabilities include things like short-term loans, accounts payable and interest payable. Long-term liabilities include any debts that will mature over a year, as well as any deferred tax liability. Finally, shareholder’s equity is listed, which includes any value that the company’s owners have invested in the business (common stock), as well as any additional paid-in capital.
These are the three primary components of a balance sheet, and the entire statement is derived from a simple equation: Assets = Liabilities + Owners’ Equity. The balance sheet’s account numbers will reflect this equation, with the items in each section arranged to match up. The most liquid assets will be listed on the left side, with the more difficult to liquidate items listed towards the right.
While balance sheets are used for a variety of purposes, they are particularly useful in evaluating a company’s liquidity and solvency. By analyzing the assets, liabilities and shareholder’s equity, you can assess a company’s ability to meet its short-term financial obligations, pay off its long-term debts, and distribute dividends to shareholders.
The details contained in a balance sheet can also be helpful when making investment decisions. The analysis can help you decide whether a company is worth investing in, or if it has the potential to grow and prosper.
For those looking to work in the finance industry, understanding balance sheets and other financial reports is crucial. While accountants are primarily responsible for creating these documents, they’re also important tools for other professionals, such as investment banking analysts. These individuals use balance sheets and other financial statements to quickly calculate various metrics and indicators of a company’s performance, such as the current ratio. They can also use the data to predict future trends and make recommendations on how a company should move forward.