Common-size balance sheet

Each item is expressed in terms of percentage of total assets From common-size balance sheet, can evaluate portion of important items  Liabilities percentage Working capital 

Components of shareholders’ equity

Owner’s equity  Residual interest in assets that remains after subtracting an entity’s liability Include:  Contributed capital (31)  Amount contributed by equity common shareholders Par value

Alternative formats of balance sheet

Classified balance sheet (9) current/noncurrent assets/liability is reported separately  useful in evaluating liquidity  Liquidity – based format (10) Present assets and liabilities in the order

Limitation of BS

There are a number of assets and liabilities that do not appear on the balance sheet Employees, reputation…

Use of Balance sheet

To asset a firm’s  Liquidity (7): ability to make short-term obligation Solvency (8): Ability to make long-term obligation Ability to make distributions to shareholders Should

Elements of balance sheets

Balance sheet Report firm’s financial position at a point in time Consist of 3 elements Assets (4): Resource controlled as results of past transactions that