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Cash & Short Term Investments
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Cash and short term investments are the sum of two balance sheet line items: cash & equivalents, and short term investments in marketable securities.
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Both are considered very liquid assets.
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Short term investments are disclosed as part of a company's current assets on its balance sheet, they're typically held with the intent to gain quick returns therein are generally sold within 3-12 months of closing (they can easily be converted to cash).
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The accounting of said investments are treated on the assumption they will mature within one year.
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Short-Term Investments includes:
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1. Short-term loans
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2. Certificates of deposits (with maturity of 3 to 12 months)
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3. Short-term paper (with maturity of 3 to 12 months)
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4. Financial Derivatives
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5. Trading account securities in investment services and miscellaneous financial services.
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Once said funds are converted to cash, the corresponding amount shifts over to the cash line item on the balance sheet.
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Receivables
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A balance sheet receivables statement shows the amount of money owed to a company by its customers.
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It's listed as a current asset on the balance sheet because it can usually be converted into cash in less than one year.
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The statement gives insight into the account balance and cash flow health of the business.
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The financial controller can use its statement to make decisions on ways to improve the collections process.
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Accounts receivables are typically listed as one or multiple line items on the balance sheet, they help companies track money or payments that they have yet to receive from a client or customer; they also help companies monitor client debts and reliably track revenue.
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Inventory
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Inventory on a balance sheet refers to the value of goods and materials a company has in stock and intends to sell to customers.
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Inventory is classified as a current asset on a company's balance sheet.
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The three types of inventory include raw materials, work-in-progress, and finished goods.
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Inventory is reported in the current assets section of the balance sheet and in the notes to the financial statements.
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The amount of inventory is positioned after cash and cash equivalents, short-term investments, and receivables.
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The change in inventory is a component of the calculation of cost of goods sold (one of the metrics reported on the income statement).
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The days inventory outstanding ratio measures the average number of days a company holds inventory before selling it.
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Inventory turnover is a ratio that measures how many times a company sells and replaces its inventory over a specified time.
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Other Current Assets
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Other current assets (OCA) are assets that a company owns or uses to generate income that are not common or significant.
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They are expected to be consumed or converted into cash within one year.
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OCA are included on a company's balance sheet and are part of its total assets.
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Examples of other current assets include:
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Cash and cash equivalents: Such as cash, cash equivalents, and marketable securities
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Accounts receivable: Such as notes receivable, trade receivables, and prepaid expenses
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Inventory: Such as stock or inventory
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Advances paid to suppliers or employees: Such as the cash surrender value of life insurance policies
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OCA are a balance sheet line item that represents all the short-term assets; current assets are those that can be liquidated quickly and used for a company's immediate needs.
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Total Current Assets
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Total Current Assets on a balance sheet is the sum of all cash, receivables, prepaid expenses, and inventory.
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Current Assets are company-owned assets that can be converted to cash within one year.
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Other assets that appear on the balance sheet are called long-term or fixed assets because they are durable and will last more than one year.
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Total assets accounts for:
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all current assets
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long-term fixed assets
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intangible assets
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other non-current assets
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A company's current assets are only one part of its Total Current Assets.
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Property, Plant, Equipment (Net)
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Property, plant, and equipment (PP&E) is recorded on a company's balance sheet as non-current assets.
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PP&E includes land, buildings, machinery, office equipment, vehicles, furniture, and fixtures.
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It's also called fixed assets.
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To calculate PP&E: add the amount of gross property, plant, and equipment listed on the balance sheet to capital expenditures and then subtract accumulated depreciation; the result is the overall value of the PP&E.
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Net PP&E is the figure left after applying depreciation on the given various assets.
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If a company doesn't purchase additional new equipment, then Net PP&E should slowly decrease in value every year due to depreciation.
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PP&E are long-lived (noncurrent) assets because they are expected to contribute to revenue for more than one year.
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Long-Term Investments
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Long-term investments are accounts that a company plans to keep for at least a year, such as stocks, bonds, real estate, and cash.
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Long-term investments are recorded on the balance sheet at their original cost, unless the market value has increased significantly.
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Long-term investments are also considered noncurrent assets because a company usually holds said assets on its balance sheet for more than one fiscal year.
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Long-term investments can provide a stable source of income for the company, and can be especially helpful in times of economic downturn.
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Long-term investments can also help to diversify the company's portfolio, reducing its risk.
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Long-term investments appear on the asset side of a company's balance sheet.
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Long-term investments appear in the property, plant, and equipment section of the balance sheet.
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Long-term investments are also called "noncurrent assets".
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Long-term investments are important because they can provide a stable source of income and help to diversify the company's portfolio.
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While considering whether or not to retain long-term investments, the company must evaluate the potential return on investment (ROI) versus the potential risks associated with the investment
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Long-term investments are often referred to as illiquid assets because they are harder to convert to cash than current assets.
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Goodwill & Intangible Assets (Total)
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Total Goodwill & Intangible Assets are the sum total of both items.
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Goodwill is an intangible asset that accounts for the excess purchase price of another company.
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Goodwill on a company's balance sheet represents the value the company gained after it acquired another business but can't assign to any particular asset of that business.
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Goodwill only shows up on a balance sheet after two companies complete a merger or acquisition.
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Anything the company pays above and beyond the net value of the target's identifiable assets becomes goodwill on the balance sheet.
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Goodwill is an intangible asset that is classified as a capital asset because it provides an ongoing revenue generation benefit for a period that extends beyond one year.
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Goodwill is essential for valuing a business and determining its overall worth.
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Items included in goodwill are proprietary or intellectual property and brand recognition, therefore are not easily quantifiable.
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Goodwill is calculated by taking the purchase price of a company and subtracting the difference between the fair market value of the assets and liabilities.
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Companies are required to review the value of goodwill on their financial statements at least once a year and record any impairments.
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If goodwill becomes "impaired," the full impairment amount must be immediately written off as a loss. An impairment is recognized as a loss on the income statement and as a reduction in the goodwill account on the balance sheet.
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Goodwill has an indefinite life, while most other intangible assets have a finite useful life.
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Long Term Assets (Tax, Deferred)
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A deferred tax asset is an item on a company's balance sheet that reduces its taxable income in the future.
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Such a line item asset can be found if a business overpays its taxes; the money will eventually be returned to the business in the form of tax relief.
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Long-term assets are assets (tangible or non-tangible) that will benefit the company for more that one year.
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Also known as non-current assets, long-term assets can include fixed assets such as a company's
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property, plant, and equipment but can also include other assets such as:
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long term investments
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patents
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copyright
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franchises
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goodwill
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trademarks and trade names
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as well as software.
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Long-term assets are reported on the balance sheet and are usually recorded at the price they were purchased at, therefore don't always reflect the current value of the asset.
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Changes in long-term assets can be a sign of capital investment or liquidation.
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Long-Term Assets (Other)
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Other assets are listed as a separate line item in the assets section of the balance sheet.
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This line item contains minor assets that don't naturally fit into any of the main asset categories, such as current assets or fixed assets (assets can be broadly categorized into current/short-term assets, fixed assets, financial investments, and intangible assets).
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Includes all other long-term assets that have not already been included as: fixed assets, long-term investments & receivables, deferred tax assets or intangibles.
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Commonly includes investment in affiliates, other receivables, derivative & hedging assets, prepaid pension costs or long term assets of discontinued operations.
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Total non-Current Assets
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The total non-current assets on a balance sheet can be calculated by adding up the values of all the non-current assets listed.
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Non-current assets are also known as fixed assets and are assets that a business holds for more than 12 months.
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They're usually high value, benefit the business for long periods, and can't be quickly turned into cash.
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Non-current assets are reported on the balance sheet at the price the company paid for them, then adjusted for depreciation and amortization.
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They are listed as an asset on the balance sheet and depreciated over their useful life.
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Non-current assets are a vital component of a balance sheet because they help management and investors determine the efficiency a firm can use resources to generate earnings.
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They also tend to project revenues for the long-term.
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Non-current assets can be tangible, like physical property, or intangible, like intellectual property.
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Key categories of non-current assets include property, plant and equipment (PP&E), investments, goodwill, and other intangible assets.
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Total Assets
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Total Assets (aka The Balance Sheet Formula) is calculated as: Total Assets = total liabilities + total equity; total assets are the sum of all short-term, long-term, and other assets.
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Total liabilities is calculated as the sum of all short-term, long-term and other liabilities.
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Total equity is calculated as the sum of net income, retained earnings, owner contributions, and share of stock issued.
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Total assets are the total amount of assets owned by a person or entity.
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They are items of economic value that are expended over time to yield a benefit for the owner.
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Total assets are usually recorded in the accounting records and appear in the balance sheet of the business.
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Total assets is calculated as the sum of all short-term, long-term, and other assets.
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The balance sheet displays the company's total assets and the way the assets are financed, either through debt or equity; a balance sheet can also be referred to as a statement of net worth or a statement of financial position.
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Notes Payable
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Notes payable are a line item on the balance sheet that represents a written agreement between a borrower and lender for repayment at a later date.
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They're recorded as a current liability if the amount is due within one year, and as a long-term liability if it is due at a later date.
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Examples of notes payable include purchasing a building, obtaining a company car, or receiving a loan from a bank.
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Notes payable are generally longer-term, greater than 12 months.
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The balance in Notes Payable represents the amounts that remain to be paid.
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Since a note payable will require the issuer/borrower to pay interest, the issuing company will have interest expense.
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Accounts Payable
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Accounts payable (AP) is listed on a company's balance sheet as a current liability.
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Accounts payable represents money owed to creditors, such as suppliers and creditors, for goods and services received by the company.
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Because accounts payable represents a future outflow of cash, it's categorized as a liability on the balance sheet.
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Accounts payable is typically recorded as a debit on the balance sheet.
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Although, it may be recorded as a credit if the company makes early payments or pays more than is owed.
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Current liabilities are short-term liabilities, normally less than 90 days; payable items include supplier invoices, legal fees, and contractor payments.
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Accrued Expenses
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Accrued expenses are reported on a company's balance sheet, (the document that shows the amount a company owns and owes as of a particular date).
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Accrued expenses are expenses that have been incurred but not yet paid.
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They are also known as accrued liabilities and are classified as current liabilities, therein must be paid within the current 12-month period.
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Accrued expenses are reflected on the business's balance sheet under short-term liabilities.
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They should be monitored closely by those tracking the business.
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Accrued expenses tend to be regular occurrences, such as rent and interest payments on loans; other common accrued expenses include salaries, rent, and interest.
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Current Part of Debt
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Current debt, short-term debt, or current liabilities is a company's financial obligations that are expected to be paid off within a year.
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It appears on the balance sheet as an obligation that must be paid off within a year's time.
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Current debt is classified as a current liability.
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Current liabilities include obligations such as:
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accounts payable
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amounts due to suppliers
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employee wages
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credit card balances
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payroll taxes
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rent payments
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utility payments
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and other accrued expenses.
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They're recorded on the balance sheet in the order of the shortest term to the longest term.
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Knowing about current liabilities can help determine a company's financial strength.
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The current portion of long-term debt (CPLTD) is the section of a company's balance sheet that records the total amount of long-term debt that must be paid within the current year.
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It's the amount of principal and interest that's due to be paid within one year.
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The current portion of long-term debt is stated in a separate line item in the balance sheet from long term debt.
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Current Part of Taxes to Pay
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On the balance sheet, the current tax amount indicates liabilities that affect the organization’s present value.
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Taxes due within 12 months are current liabilities and are recorded as Income Tax Payable; taxes to be paid in the later periods are recorded as Deferred Tax Liabilities.
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Current Revenue (Deferred)
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Deferred revenue, or unearned revenue, is recorded as a liability on a company's balance sheet.
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It represents the payments a company receives in advance for products or services that are to be delivered in the future.
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The deferred revenue account is normally classified as a current liability on the balance sheet.
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It can be classified as a long-term liability if performance is not expected within the next 12 months.
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Deferred revenue is recognized as revenue after cash is received.
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Once the income is earned, the liability account is reduced, and the income statement's revenue account is increased.
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Examples of deferred revenue include an annual subscription for SaaS software, a retainer for legal services, or a hotel booking fee.
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Other Current Liabilities
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In financial accounting, "other current liabilities" are categories of short-term debt that are grouped together on the liabilities side of a balance sheet.
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Other current liabilities are a line item in the balance sheet that aggregates several current liability accounts too minor to report separately.
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Other current liabilities include:
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Accrued taxes
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Deferred revenue obligations
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Accrued payroll expenses
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Income taxes due
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Interest due on loans
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Current obligations from restructuring
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Gains on the sale of real estate in the prior year that were not recognized until the current year
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Wages owed
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Income and sales taxes owed
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Pre-sold goods and services
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Total Current Liabilities
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Total current liabilities on a balance sheet is the sum of all current liabilities.
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Current liabilities are debts or obligations that a company owes and is required to settle within the longer of the two (1) one fiscal year, or (2) its normal operating cycle.
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Examples of current liabilities include:
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Accounts payable
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Short-term debt
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Accrued expenses
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Salaries
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Taxes
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Deferred Revenues
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Long Term Debt (Total)
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To calculate a company's total long-term debt, add together the liabilities listed in the current liability section and the long-term liability section of the balance sheet.
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Long-term debt is the debt a company owes to investors that's payable after more than one year.
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It is shown as a non-current liability in the balance sheet.
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non-Current Revenue (Deferred)
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Deferred Revenue is a liability on a company's balance sheet that represents advance payments for products or services that are to be delivered in the future.
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It's also known as unearned revenue.
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Deferred Revenue is recorded as a liability on the balance sheet because the payment has not yet earned thereby the company still owes something to the customer.
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Payment isn't considered revenue until it's earned, therefore it's not reported on the income statement.
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Deferred revenue is normally classified as a current liability on the balance sheet.
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It can be classified as a long-term liability if completion of the transaction isn't expected within the next 12 months.
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Long Term Tax Liability (Deferred)
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Deferred tax liability is a type of long-term liability.
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Companies incur it after they postpone paying taxes on certain types of accounting income.
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The amount of the liability is the difference between a company's taxable income and its accounting or book income.
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non-Current Liabilities (Other)
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Other long-term liabilities are debts due beyond one year that aren't deemed significant enough to warrant individual identification on a company's balance sheet.
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Other long-term liabilities are grouped together on the balance sheet rather than broken down one by one with an individual figure.
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Some companies may disclose the composition of them in the footnotes of their financial statements, if they believe they are material.
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Total non-Current Liabilities
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The sum of all Long-term liabilities/noncurrent liabilities.
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Long-term liabilities/noncurrent liabilities are debts and other non-debt financial obligations with a maturity beyond one year (must be paid back sometime after 1 year).
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They can include debentures, loans, deferred tax liabilities, and pension obligations.
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Total Liabilities
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Total liabilities are the combined debts that an individual or company owes.
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They are generally broken down into three categories: short-term, long-term, and other liabilities.
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On the balance sheet, total liabilities plus equity must equal total assets.
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Common Stock (Net)
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Common Stock on a balance sheet is an accounting representation of the stock shares issued by a company or business.
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It's recorded in the "stockholders' equity" section of the balance sheet.
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Common stock represents ownership in a company and reserves a legal claim on the company's assets and earnings.
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It's a component of "paid-in capital" (the total amount received from investors for stock).
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Common stockholders have voting rights and are entitled to get dividend on their holdings.
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The capital raised from issuing stock is used to finance the working of the business.
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The book value or net worth of their shares is equal to the company's assets minus its liabilities.
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Retained Earnings
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Retained Earnings on a balance sheet is the amount of net income remaining after a company pays out dividends to its shareholders.
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Retained Earnings are a measure of all profits that a business has earned since its inception.
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They are represented in the equity section of the balance sheet.
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To calculate retained earnings, take the beginning-period retained earnings, add the net income (or loss), and subtract dividend payouts.
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Common Equity (Total)
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Total common equity is the sum of the value of common stock plus retained earnings.
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It's also known as owners' equity or stockholders' equity.
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To obtain common equity find the quantity of outstanding stock and multiply it by the face value of the stock then add retained earnings.
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Shareholders Equity (Total)
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Shareholders' equity is the remaining assets available to shareholders after debts and other liabilities have been paid.
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It's calculated by subtracting total liabilities from total assets (listed on a company's balance sheet).
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The shareholders' equity subtotal is located in the bottom half of the balance sheet.
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Equity is considered a type of liability, as it represents funds owed by the business to the shareholders/owners.
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If shareholders' equity is positive, a company has enough assets to pay its liabilities.
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If it's negative, a company's liabilities surpass its assets.
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Equity and shareholders' equity are not the same thing.
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While equity typically refers to the ownership of a public company, shareholders' equity is the net amount of a company's total assets and total liabilities.
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Shareholders Equity & Liabilities (Total)
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Total Shareholders Equity & Liabilities is the sum of totla Shareholders Equity and total liabilities.
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Shareholders' Equity is the portion of a company's assets that would be left over if the company went bankrupt and had to liquidate all of its assets to pay off its debts.
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Shareholder liabilities are incurred in the process of issuing equity and include items such as dividends payable.
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Total liabilities are the combined debts that an individual or company owes.
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Shares (Common)
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The number of common outstanding shares.
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Shareholders Equity (Tangible)
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Tangible shareholder equity is the shareholders' equity of a company, excluding all goodwill and intangible assets.
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Tangible shareholder equity is calculated as ordinary shareholders' equity minus goodwill and other intangible assets.
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Shareholders' equity is the remaining assets available to shareholders after debts and other liabilities have been paid.
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It's calculated by subtracting total liabilities from total assets, both are listed on a company's balance sheet.
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The formula for shareholders' equity is: Equity = Total Assets - Total Liabilities.
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Shareholders' equity is located in the bottom half of the balance sheet.
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If shareholders' equity is positive, the company has enough assets to pay its liabilities.
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If shareholders' equity is negative, the company's liabilities surpass its assets.
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Equity is considered a type of liability, as it represents funds owed by the business to the shareholders.
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Net Debt
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Net debt is a liquidity measure that shows the amount of debt a company has on its balance sheet compared to its liquid assets.
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It's calculated by subtracting cash and cash equivalents from short-term and long-term liabilities.
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The formula for net debt is net debt = short-term debt + long-term debt - cash and cash equivalents.
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Net debt is used to determine if a company can pay all of its debts if they were due immediately.
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It can also be used to determine if a company can take on more debt.
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Total Debt
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Total debt on a balance sheet is the sum of all money borrowed and due to be paid.
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To calculate total debt, you add the values of long-term liabilities (loans) and current liabilities.
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Current liabilities are those that you expect to pay within one year.
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Long-term liabilities are those you expect to pay after a year.
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Net debt is calculated by subtracting all cash and cash equivalents from the total of short-term and long-term debt.
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Financial lenders or business leaders may look at a company's balance sheet to factor in the debt ratio to make informed decisions about future loan options.
