How to analyze a Balance

10 January 2009 - 15:03

The Balance is a financial report that shows the assets, liabilities and patrimony whereupon it counts a certain company in a while.

The assets can be, for example:

• the money that physically is in the company (for example, in its strong box), or the money that it has deposited in the bank (for example, in its current account).
• the physical elements whereupon count the company to conduct their operations and that has a permanent duration (for example, buildings, lands, machineries, vehicles of transport) or that they last temporary (for example, merchandizes).
• the debts that have the clients with the company.

The liabilities can be, for example:

• the debts that the company with its suppliers has.
• the debts that slope with the banks has.

The patrimony can be conformed by:

• the contributions that the partners have done.
• the benefits or utilities that the company has obtained.

The importance of the Balance, is that it allows us to know the situation financial the company in a while determined, for example, allows us to know the resources whereupon it counts, the results obtained in the period, etc.

We see next a simple example of how to analyze a balance:

ASSETS		LIABILITIES
Current assets		Current liabilities
Box and banks	1000	Tributes to pay	200
Clients	3900	Suppliers	1800
Merchandizes	1200	Accounts to pay diverse	500
Finished products	800	CURRENT PASSIVE TOTAL	2500
Products in process	200
Raw materials and auxiliary	500	Noncurrent liabilities
Packages and packing	400	Debts in the long term	700
TOTAL CURRENT ASSETS	8000	Social benefit of the workers	300
		NONCURRENT PASSIVE TOTAL	1000
Noncurrent assets
Inm. maq. and equipment	16200	PATRIMONY
Accumulated depreciation	1200	Capital	10000
TOTAL NONCURRENT ASSETS	15000	Reserves	1000
		Accumulated results	8500
		TOTAL PATRIMONY	19500
TOTAL ASSETS	23000	PASSIVE TOTAL AND PATRIMONY	23000

Some conclusions that we could obtain are:

• the company counts on a total investment of 23000, a short term investment of 8000, and one long term investment of 15000.
• the greater investment of the company is long term, due to the acquisition of buildings, machinery and equipment (15000).
• the total financing of the company is of 23000, which is divided in:
• financing of third parties: in the short term 2500, and long term 1000.
• own financing: in the short and long term 19500.
• more with equity capitals in the acquisition of goods for use of the company is reversed mainly (fixed assets), instead of to use it in the acquisition of merchandize for the commercialization (active current).
• which can be observed that it has not acquired loans in the bank, would increase the liabilities, but rather it has been used the utilities and the capital contributed for the financing.
• finally, it nótese that in the balance the basic principle of the accounting is fulfilled: the Assets always must be equal to the Liabilities and Patrimony (23000 = 23000).

Labels: Accounting, Finances, Tools of business

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