The senior officials and chief accountants of the company sit regularly and examine the balance sheets, looking at the numbers to know the financial health of their organization. They check the following four components of a balance sheet.
4 important components of a balance sheet
1. Assets:
They look at the number of assets and know the resources owned by the company. They check long-term assets: buildings, machines, land and transport equipment. The
numbers show what was the cost of these assets at the beginning of the year and
after deduction for devaluation, what are they at the end of the year? If they have to sell these assets, they will know what to expect for them. Then the existing assets are: Cash, Receivable Accounts and Prepaid Expenses These assets are life lines for day-to-day activities of the company and management needs to keep cash flow so that the organization can fulfill the demand. To make officials happy, the number of assets required to be bigger. After all, without resources, how can a company work? If there is a lack of assets, then the company will have to adopt new approaches to improve the situation.
2. Liabilities:
The company has liabilities in the opposite direction of the balance sheet. These loans are to be given to the company: creditors, payable accounts, repayment on commercial paper, income tax earned from the previous year, and any other acquired liabilities. In addition to these current liabilities, long-term liabilities, minority loans, capital leases and any other loans and interest repayments. The numbers should ideally be within a manageable range so that the company can use its resources to pay back its creditors.
3. Equities:
Equity is a capital invested by the owners and other shareholders of the company. Companies often issue shares in different public offerings at different times. Some companies have all the shares owned by the promoters, while the shares of other companies are purchased from a large part of the general public and do business for free in the capital and derivative markets. The number is divided into preferred stock and common stock, which tells the management what the rights of different shareholders are and what will happen in the event of closing the liabilities of the company. These numbers also tell them how much dividend they will have to give and what will happen during the annual general meeting of the voters' rights of the members. In addition, they look at the income they maintain so that they know how much investment has been made in the company.
4. Ratio:
Calculation of return on ratio assets, inventory turnover ratio, quick ratio, net worth of total liabilities etc. This ratio tells the management that if the use of the property is beneficial, then if the company has more resources which can be used better, if the existing assets are being produced in the present liabilities or vice versa, if the production of objective production is being made And so on The favor of the assets and liabilities will always be matched. However, this total figure is not sufficient enough indicator for balance sheet analysis. Analysis of the balance sheet is always done by comparing current assets and current liabilities, income and shareholder's equity, debtors and creditors, and so on. These numbers should also be benchmark with market average and other companies' balance sheets. Unless analysts established benchmarks, they never know whether the numbers are effective or not. There is a lot that can tell a balance sheet company. To present the correct picture of the business, it is necessary to maintain an accurate balance sheet. It is important to know more about the newcomers and to help them find out what is going on in the form of a bail sheet, that is, the name of the person who knows the name of the person who has been arrested.