Tips on Balance Sheet and Financial Ratios Research

Balance Sheet Definitions

These balance sheet definitions generally follow the accepted balance sheet line items. Not all standard items are listed:

Assets

Accounts Receivable: A short-term asset, usually representing a credit for a completed sale; part of Current Assets.

Cash: Money on hand in checking, savings or redeemable certificate accounts; part of Current Assets.

Current Assets: The sum of a firm's cash, accounts receivable, inventory, prepaid expenses and marketable securities which can be converted to cash within a single operating cycle.

Inventory: The stockpile of unsold products.

Total Assets: The sum of current assets and fixed assets such as plant and equipment.

Liabilities
:
Accounts Payable: A short-term liability, usually representing invoices and bills due within one year; part of Current Liabilities.

Current Liabilities: Measurable debt owed within one year, including accounts payable, accrued liabilities, taxes due and short-term notes due.

Long Term Debt: Liabilities due in more than one year.

Total Liabilities: Current liabilities plus long term liabilities such as notes and mortgages due over more than one year.

Net Worth: Current assets plus fixed assets minus current and long-term liabilities.

Income Statement

Net Sales: Annual volume of sales.

Cost of Sales: Cost of operations and production which reduce profit margins.

Gross Profit: Pre-tax profits

Net After Tax Profit: Sales revenue less expenses, after taxes.

Net Working Capital: Current assets minus current liabilities.

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