Balance Sheet Synonyms: Master list of words to use when creating a balance sheet. | Brian Feroldi posted on the topic | LinkedIn (2024)

balance sheet

How detailed should your balance sheet forecasts be? The best answer I can offer is -- it depends. There are factors you should consider. But first, what's this balance sheet forecast telling you?---------------Cash and equivalents: Cash is increasing by $3.2 million. At face-value, there's no commentary about why. But if you scrub the numbers, you can figure it out.Accounts receivable: A/R goes down by $6.5 million. Without insight into how credit sales have changes, you can assume there were substantial cash collections. This is likely some of the explanation as to why cash went up.Inventory: Stock went down by $1 million. Without an understanding of purchases and sales, it's hard to know what this means. At face-value, this suggests that cash was coming in.Prepaids: This current asset account declines $630K over the 12 months. Because it appears this is declining by the same amount each month, this infers there was an upfront expense that's being amortized. It doesn't appear there is more cash going out over time.PP&E: Boom! Property, plant, and equipment increases by $14 million in August. How's it being financed? All cash. So it turns out that this company isn't merely generating $3.2 million in cash -- they generated a whole lot more and used nearly 80% of it toward capex.Intangibles: Nothing interesting here.---------------Accounts payable: Money due to suppliers declines by $2.6 million. This is a positive sign given that the company appears to be in a growth position.Other current liabilities: There's no detail here. The Controller's choice to combine all other current liabilities into one line-item is unhelpful. But because there's so little movement, the lack of detail isn't too concerning.Long-term debt: Loan amortization occurs quarterly with no new debt being issued.Net income and retained earnings: This company is healthy and growing at a favorable rate.---------------How detailed should the balance sheet be?It depends on the tradeoff between having too much detail and not enough. Even with just 11 key accounts, this balance sheet tells a story.For strategic, long-term forecasts, a high-level view is often sufficient. It focuses on the core accounts and trends. It can be useful for communicating with the Board or PE investors, who are more interested in overall performance rather than specific operational activities.A high-level forecast is also quicker to prepare and easier to adjust when circ*mstances change.But the tradeoff between ease of use and deeper intelligence is striking. You can't really tell what the drivers are within these line items -- only that there are drivers that you'd have to dive deeper into.If you were to include all of the minutia behind these accounts, you'd likely be overwhelmed with the detail and miss the big picture changes of what you see here.❓What would you add?♻ Share if you found this insightful.#seidmanfinancial#cashflow

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A VERY DIFFERENT WAY OF LOOKING AT FINANCIAL STATEMENTS… OR YOU WILL NEVER LOOK AT ANY FINANCIAL THE SAME WAY EVER AGAIN!!!PART III OF III... THE END...Liabilities are made up of accounts payable. Money you owe for expenses that you bought on credit, merchandise that you will sell (inventory). Short term debt like a bank loan. A mortgage payable on a building or a big piece of machinery. You will pay accounts payable with today’s dollars, but you will pay the mortgage with dollars over the next 30 years if it’s a mortgage on a piece of property. The values are really all different.And then you go back to the basic equation of accounting, Assets equal Liabilities plus Capital and that capital number is a conglomeration of a whole lot of different values. Capital, for a corporation, is made up of common stock, additional paid in capital and something called retained earnings. Retained earnings is the profit or loss that the company sustained over its lifetime less any dividends that were paid to the shareholders an that number can be the accumulation of transactions over the last 50 years or so. And it’s made up of so many different values and estimates that the Balance Sheet values are meaningless. So, you are adding past values, current values, and future values and estimates made by management and some dictated by the Internal Revenue Code and various other pieces of legislation over a period of an undetermined number of years. How significant can this number be??? And that’s the balance sheet. The Statement of Income is the results of the income, cost of sales, and expenses of the business over the last accounting period, which is usually the last calendar year. So, the numbers are all current as far as the value goes unless we have another crash of the stock market like we had in 1929 in the middle of the year.There may also be a Statement of Equity which summarizes the changes to the capital stock and retained earnings during the year and the last statement, the Statement of Cash Flows is a conglomeration of taking numbers from all the other statements and explaining the change to cash. BUT the most important part of the financial statement package in my opinion are The Notes to the Financial Statements. The notes explain the basis of accounting used, the terms of the long-term debt, and other information about the assets and liabilities which give the reader information about the numbers on the other financial statements.So, this is accounting!!! GAAP gives you a set of numbers that are meaningless except that you can compare them from one year to the next and see how the entity is doing. I will bet that no one ever explained a financial statement package to you in this way. Rely on the Statement of Income because that statement gives you numbers that are consistent, and the value of each item is consistent throughout the statement.

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Understanding the Balance Sheet: A Comprehensive OverviewIntroduction:In the financial statements, the balance sheet holds a pivotal position. It serves as a snapshot of a company's financial health, providing a detailed summary of its assets, liabilities, and shareholders' equity at a specific point in time. This post aims to demystify the balance sheet, shedding light on its purpose, structure, and key components.Definition and Purpose:A balance sheet, also known as a statement of financial position, is a crucial financial document that showcases the financial standing of an organization. It presents a company's resources (assets), obligations (liabilities), and the residual value belonging to its owners (shareholders' equity) at a given date. The primary purpose of a balance sheet is to provide insight into a company's financial condition, allowing stakeholders to assess its liquidity, solvency, and overall financial performance.Structure and Components:The balance sheet follows a structured format that adheres to the fundamental accounting equation:Assets = Liabilities + Shareholders' EquityAssets:Assets encompass all the resources owned or controlled by a company that hold economic value and can be utilized to generate future benefits. They are typically classified into two categories: current assets (e.g., cash, accounts receivable) and non-current assets (e.g., property, plant, and equipment).Liabilities:Liabilities represent the obligations or debts owed by a company to external parties. Like assets, liabilities are categorized into current liabilities (e.g., accounts payable, short-term loans) and non-current liabilities (e.g., long-term loans, bonds).Shareholders' Equity:Shareholders' equity represents the residual interest in the company's assets after deducting liabilities. It includes various components such as issued capital, retained earnings, and accumulated comprehensive income.Key Financial Ratios and Analysis:The balance sheet serves as a crucial tool for financial analysis and decision-making. Several key ratios can be derived from the information provided in a balance sheet, including:Current Ratio:Current Assets / Current LiabilitiesMeasures a company's ability to meet its short-term obligations.Debt-to-Equity Ratio:Total Liabilities / Shareholders' EquityEvaluates the proportion of debt financing compared to equity financing.Return on Assets (ROA):Net Income / Total AssetsMeasures the profitability generated per unit of assets.Working Capital:Current Assets - Current LiabilitiesIndicates a company's ability to cover its short-term operational needs.ConclusionA balance sheet is an essential financial statement that provides valuable insights into a company's financial position. By presenting the relationship between assets, liabilities, and shareholders' equity, it offers a comprehensive view of a company's resources and obligations. #finance #accounting

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What is adjusted EBITDA?Adjusted EBITDA removes one-time, irregular, and non-recurring items that distort EBITDA.EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization.Since EBITDA measures a company's earnings, it's an overall indicator of that company's profitability. The higher EBITDA, generally, the more profitable a company is.But one of the downfalls of EBITDA as a comparison metric is that two companies can have the same EBITDA but vary in terms of how leveraged they are.So adjusted EBITDA—also called normalized EBITDA or standard EBITDA—removes irregular and non-recurring items that might distort a company's EBITDA.Why use adjusted EBITDA?Adjusting EBITDA gives a normalized number undistorted by irregular gains, losses, or other items.In other words: it's a more fair, standard measure of a company's financial performance.This means it's fair game to use when comparing companies.Financial analysts, investment bankers, and finance professionals use a company's adjusted EBITDA during valuation.What are the limitations of adjusted EBITDA?Adjusted EBITDA, while more reliable and normalized than EBITDA, still has two big caveats.First, there's no standard or universally agreed-upon list of what can and cannot be included in the adjusted EBITDA calculation. So bad actors can corrupt (or "denormalize") their adjusted EBITDA with some creative accounting.Adjusted EBITDA second limitation is that it's not reflective of cash flow, which is an essential overall indicator of a company's financial health.So you should always consider adjusted EBITDA in the context of at least one other financial metric.How to calculate adjusted EBITDA:Adjusted EBITDA = EBITDA ± Adjustments(And if you need a refresher on calculating EBITDA, it's net income + interest + taxes + depreciation + amortization)Common non-recurring expenses and adjustments:Adjustments are one-time expenses (including interest expense) and other nonrecurring expenses.Here's a non-exhaustive list of common EBITDA adjustments:Non-operating incomeUnrealized gains or lossesNon-cash expensesOne-time gains or lossesStock-based compensationLitigation expensesSpecial donationsAbove-market owners’ compensation (private companies)Goodwill impairmentsAsset write-downsAdjusted EBITDA vs. a company's net income:You're not alone if you're confused about the difference between adjusted EBITDA and a company's net income.But fortunately, the difference is pretty clear.And we can derive it from the formula for adjusted EBITDA.Here's that formula again:Adjusted EBITDA = EBITDA ± Adjustments.And breaking out the formula for EBITDA, we get:Adjusted EBITDA = Net income + Interest + Taxes + Depreciation + Amortization ± AdjustmentsSo a company's adjusted EBITDA will almost always be much higher than its net income because adjusted EBITDA is net income plus a bunch of other stuff.

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This is another article by Josh Aharonoff

What a load of resources

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Free Financial Statement 101 course!Save a lot of money!If you want a consolidated PDF with clickable links you can get it here:https://lnkd.in/gGrZ3gPuIf you understand financial statements and how they're interlinked you have a solid base to grow from in Finance.Everything that happens in a company touches on the financial statements sooner or later.If you can translate these business activities into financials and the other way around, you suddenly have a language to communicate with business leaders.But first, let's get the basics in place...4 Modules and 25 Lessons with some great infographics!Here we go…----------FINANCIAL STATEMENTS1. The Financial Statements -https://bit.ly/3m0PGvO2. Financial statement accounts -https://bit.ly/3oHo5Ax3. The three statements explained -https://bit.ly/3K6o7cw4. The readers of financial statements -https://bit.ly/3oGfQF55. Shareholder value creation -https://bit.ly/40x3rRO----------INCOME STATEMENT6. The income statement explained -https://bit.ly/3m0wLRL7. From revenue to net income -https://bit.ly/3ZPZu9X8. Income vs expenses -https://bit.ly/41ADgua9. All about revenue -https://bit.ly/41YGMyh10. Examples of OPEX -https://bit.ly/3mUKMkz11. The difference between COGS, OPEX, and others -https://bit.ly/41yB06I12. CAPEX vs. OPEX -https://bit.ly/40WK5pd13. Other income and expenses -https://bit.ly/3V5aHCo----------BALANCE SHEET14. The sections of the balance sheet -https://bit.ly/3Uag6I315. 20 examples of assets -https://bit.ly/3ZV90Zc16. Fixed assets and CAPEX -https://bit.ly/3ntyZt917. All about accounts receivables -https://bit.ly/40OxuUI18. 20 examples of liabilities -https://bit.ly/3mjXWas19. Introduction to retained earnings -https://bit.ly/3Mginjb20. Debt vs. Equity -https://bit.ly/3KriczZ21. All about accounts payables -https://bit.ly/3UNdWOM----------CASH FLOW STATEMENT22. The statement of cash flows -https://bit.ly/3nD9QfU23. Cash flow drivers -https://bit.ly/40Tmpln24. Three types of cash flow -https://bit.ly/42Y5xff25. Direct and Indirect cash flow statement -https://bit.ly/40rBaw1----------Get a grip on financial statements today.Start talking about business finance with business leaders tomorrow.What more would you like to know about financial statements?----------🧑💼 I'm a partner at Business Partnering Institute🆘 Need immediate help in your finance team, call us!🤝 We help increase the influence of your finance team🔔 To see more of my content, hit the bell on my profile📻 Find our#FinanceMasterpodcast on your channel📄 Check out all our templates and cheat sheets here: https://lnkd.in/eC_zuCU4

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.Balance Sheet and It's 3 Main Component..The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It consists of three main components: assets, liabilities, and equity.1. Assets: Assets are resources owned by a company that have economic value and can be used to generate future benefits. They can be categorized into current assets and non-current assets. Current assets include cash, accounts receivable, inventory, and short-term investments. Non-current assets include property, plant, and equipment, long-term investments, and intangible assets like patents or trademarks.Example: Let's say a company has $10,000 in cash, $5,000 in accounts receivable, and $20,000 worth of inventory. These would be considered assets on the balance sheet.2. Liabilities: Liabilities represent the company's obligations or debts to external parties. Like assets, liabilities can be classified as current or non-current. Current liabilities include accounts payable, short-term loans, and accrued expenses. Non-current liabilities include long-term loans, bonds payable, and deferred tax liabilities.Example: If a company has $8,000 in accounts payable and a $15,000 long-term loan, these would be recorded as liabilities on the balance sheet.3. Equity: Equity represents the residual interest in the company's assets after deducting liabilities. It is the ownership interest of the shareholders in the company. Equity includes common stock, preferred stock, retained earnings, and additional paid-in capital.Example: If a company has issued $50,000 worth of common stock and has $30,000 in retained earnings, these would be components of equity on the balance sheet.It's important to note that the balance sheet follows the fundamental accounting equation: Assets = Liabilities + Equity. This equation ensures that the balance sheet remains balanced, hence the name "BALANCE SHEET."..#Finance #Accounting #Taxes #Consultant

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