Project 3: Analyzing a Balance Sheet (1)

The balance sheet summarizes

a company's assets, liabilities, and shareholders' equity at a specific point in time.

The higher the depreciation expense in the early years of the asset lowers

a company's taxable income in those same years.

Liability represents

a debt that the company must pay, such as employee wages, or bank loans.

The 'Balance Sheet' is also known as

a statement of financial condition.

An asset is

any resource that the company owns, such as cash, accounts receivable, equipment, or land.

Non-Current assets are

assets that may take longer than a year to convert to cash, such as land, buildings, equipment, and intangible assets.

Current assets are

assets the company can convert into cash within a short timeframe, such as cash, prepaid expenses, accounts receivable, and inventory.

The accelerated method can be used on the balance sheet to

calculate income taxes.

Land remains on the balance sheet at

its original cost.

In a balance sheet, non-current assets are

listed as "Property", "Plant", "Equipment Assets", Long-term Assets" or "Fixed Assets".

Intangible assets are

long-term assets, such as trademark, copyright, patent, and goodwill.

The straight line method can be used on the balance sheet to

maximize its total asset value.

In a publicly traded company, owner's equity is called

net worth.

The Chief Financial Officer (CFO) is responsible for

the balance sheet.

The cost of the asset less depreciation yields

the book value.

Liquidity is

the company's ability to convert the asset into cash.

Depreciation is an accounting method of allocating

the cost of a tangible asset over the useful life of the item.

Two methods of accelerated depreciation are

the double-declining method and the sum-of-the-years method.

Equity (OE or Net worth) represents

the ownership in the business, and is calculated as the difference between assets and liabilities.

Goodwill is

the premium amount that a buyer would pay to purchase a company above and beyond the value of all of the other assets minus the liabilities on the balance sheet.

The original cost of an asset less the end of useful life value divided by the number of useful years yields

the straight line method of depreciation.