Accounting Simplified Search Balance Sheet Analysis o amazon vt 2 wre Easy Sites 2 Pema Seren ts S90 rent G Share /Save G9 @ 2 etn Toms ring tree kay accounting 2 Sate the current ratio, and the quick ratio. ‘One of he most important massuea to conidrin anc statement naive a vomit Paye \ahatner or nthe business can py dist remain In eperaton. The curent ate ‘quek tt, and waking capt can quickly assess 2 company’s shrt-tem franca! Select Language strength This i epacialy enportant snes te rots of he business domo accurately onaaty Coe Wanane Under tne accrual accountng method, the revenve ls recognizes when earned, whether ‘not ashisrcsived as payment Since sles maybe on cea, ven proftabe ‘companies may be atk duet too much debt shortage of ui asses shoot olor a quik way asess the actual shortorm Iquy ane sonath ofhe Now lt tke @ ook st spying working capi the cuenta, and he quik too the company balance shetfr Sunny Sunglasses Shop to assess lauty and ‘nancial eg, Balance Sheet Analy: Sunny Sunglasses Shop Company Balance Sheet December 31, 2012ean ba THRE) Aeterna as sccons Receivable 4 21,300 | Curent Porton Long-term bett| 900 Lee sowaree 8°34. 5 Goc)) cunt Parton Hota Payal 400 ey 5628 Total current Lables ETRE Propad Piperces - Total Current assets "83/205 Long-term Liabilities Mortgage Payable (greater | g tan 2 monte) soon oncurrent Assets pas. Shorictenn Baron om Suto 3/000 | Hote Payabie aura eam ‘Gna 20.000, Less: short-term Potion (a0; Total Noncurrent "592,000 Teta Long-term Liab 25,50 nae : fng-term Liakiities ‘otal Liabilities esEre swe ‘nines! Equity (Net Worthy fataned eamnos 15,283 sees ‘Total abilities a Net Worth $102,000 ‘olance Sheet Analyse Example + Working Capital 62.208 -10.228=67,902 ‘The working capital number more han enough pay down current bili coming 0, Cash alone can sly cover the current abies, Of curs, thi may be an isicaton that Sunny Sunglsseshas too many resources that can cotbus to growth ‘siting in cash. Cash and accounts receivable are alo pushing he ourentrato and quick ‘ale substantially above the ndusty averages Current Ratio 8.20610.205= 67 Quick Ratio (69,208 -5.625)10.225 4 Notice that ihe ak ae removed inventary fam ta calculation, as vena nat considered a “que asa” quelyconvertbieto cash, Prepld expenses would ao be ‘emoved, bute balance was 22 by the end ofthe yea. “The second acoumtng formula, he cuenta, is igh due thigh recalvabes anc Villa Mendes ox Booking.com “The quck alo nol make signin france because inventory has lower ‘balance compared othe othr cure assos Invent oo fw? As anew busines ‘mer, Sunny closely monitors his invertor to determine which model sl ho fastest a has rot maintained high ventory ovls a raw rade ar arving fr tho summer ‘son, Mainsning invertor lovels hata oo low, Homever, can have a nega Impact on sales. Te determine wheter ornate ventory ves ate adequate for Suny Sunglasses ‘Sop, elk invent tumover ‘Tha nner tnan ermal eah balance is duet the owns preparing te fognce a nw ‘bling onthe land prehased for $20.00 for fre use. rte company france anew bling for $900,000, wih a $30,000 down payment the balance sheet accounts an accounting ratios would be afoctd as fellows: Balance Sheet Analysis Sunny Sunglasses ShopCompany Balance Sheet December 31, 2012 orem arenas enn iia} (serous Dayana fame Sccounsrecevsble $2100 Curent orth Lng-taw babi 300 (lee Nowanca for 822g” 7o0) cree poten note Payanle a0 trvenery 688 | Total Cure tities "THERE Prepaid erpensas {otal Gunn assots “TSEEUE! Long-torm Lables Mortgage Payable forester thi? 5295 oop 22 montis) oncurrant Assets ieee chore tit Beton i Steno Fits Bayan aut 00 on ad Eun sp0,000 | Less: Shattarm Potion an {$922,600 Total Long-torm Labites $296,500 otal Liait EZ rman (Ue Won) Retained Eemings 15,283 “otal owner's Equity 65,253 “otal Liabiities @ Net Worth "FSDHGHR Balance Shoot Anais Example 2 Inthe socond oxample of balance shoot analysis, ote hat the cash balance of $30,000 has ransfores rom currant ast a noncurent asses land and bung, contig {$0,000 totre balance. Th romaining $270,000 came fom a now morgage forthe balling, Assuring no cerent amounts dv on te new mortgage, onouret assets ‘nareated by $200,000, lngabltes increased by $270 000, ana cuentas Land ana Bulling $200.00 $270,000 so ‘The Working Capital Accounting Formula changed accorénay Working Capital: 19.208 -10.225= 27.903 ‘Suomy Sunglasses Shop sith plenty af erent asses to cover curent labiites coming due. ‘Te current ratio and quick ao are changod te: New Current Ratio: ‘.20810.225 = 3.7 New Quick Ratio: (99.208 -5.925)10.225 3.2 ‘This use af cash for fnancng a bulng fr uture growth has word he cuenta ‘2 quick ato substantial but eins hghor han te indus average. Though ss ot as sigiicat of an is6u8 as lower than normal curant and quck rats, Suny shoul ‘ext ok ino whether ono coun ecauable turnover too om ‘ack rom Salance Sheet Analysis tothe Accounting Salance Shel Main Page ‘Backto the Financial Statement Analy Main Page ‘Onine AccourngBusness Accourting Home Page © Share/Save A Leave a Reply