Financial Statement Analysis

Understanding Balance Sheet Part 1

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Agenda for the session

⮚ Understanding what is Balance Sheet

⮚ Understanding Structure and Format of Balance Sheet

⮚ Information conveyed by Balance Sheet of a firm

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
What comes to your mind when you see
a Balance Sheet of a company?

Do you think that you understand this

financial statement?

Source: JSW Steel Limited, Annual Report 2019-20

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
IMAGINE

Have you ever imagined why companies are preparing Balance Sheet?

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
THINK

Assume that you are working in a bank and a company has applied for a
loan of Rs. 2.50 crores? Think what is the document you will like to see to
gauge the financial position of a company?

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
THINK

Do you think that different companies are reporting about their Balance
Sheets in different way or they are using the same format of Balance
Sheet for reporting to the users of Financial Statements?

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Are you interested in knowing

⮚ Should we invest in a particular company?

⮚ Should we buy bonds of a particular company?

⮚ How the management of a particular company is performing?

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
 If you are curious to seek answers
to all these, then this session will
help you. We shall try to understand
and appreciate the importance of
Balance Sheet in this session.

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Understanding
Balance Sheet

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Balance Sheet
➢A statement that shows balances of assets and liabilities of a firm at a
point of time.

➢A Statement of Financial Position as it shows what a firm owes and what a

firm owns.

➢A statement of balances whose total of assets will always equal to the total
of Owners' Equity + Outsiders’Liabilities.

➢A statement that shows balances to be carried to the next accounting

year.

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Accounting Identity

➢Balance Sheet shows an important accounting identity/equation:

Total Assets = Owners' Equity + Outsiders' Liabilities

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited