Brian Stoffel on LinkedIn: How to analyze a balance sheet in <2 minutes. Study these 4 ratios: ⚖ 1:… | 23 comments (2024)

Whatever your political thoughts are, we are all finding out that Donald Trump is a complete fraud from a financial point of view.Turns out that the supposed billionaire gazillionaire, so so richaire, cannot pay his $600 million in judgments, which should never be a problem given that he told us he was worth $10 billion.Trump ran a private business so he could always say anything and no one would know.But that's not the case with publicly traded businesses!You can find out who's a faker in about 10 minutes of looking at their balance sheet.They might look rich, but how well can they actually pay the bills??Unlike America's foremost sneaker salesman, at any public company you can find out very easily.Use these tools below.#stocks#assets #debt#balancesheet #Accounting

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How to analyze a balance sheet in <2 minutes.Study these 4 ratios:⚖ 1: Quick Ratio❓ Question: Can the company pay its bills?➗ Equation: Cash + Equivalents + AR / Current Liabilities🔢 Guide:Fragile = <1.0Robust = 1 to 1.5Antifragile = <0.7⚖ 2: Current Ratio❓ Question: How well does the company manage its assets?➗ Equation: Current Assets / Current Liabilities🔢 Guide:Fragile = <0.7Robust = 1Antifragile = >2.5⚖ 3: Debt-to-Equity Ratio❓ Question: How much leverage is the company using?➗ Equation: Total Liabilities / Shareholder Equity🔢 Guide:Fragile = >2.0Robust = ~1Antifragile = <0.7⚖ 4: Goodwill-to-Assets Ratio❓ Question: Is the company growing organically?➗ Equation: Goodwill / Total Assets🔢 Guide:Fragile = >50%Robust = 10% - 50%Antifragile = <10%To be clear, this isn't all the balance sheet analysis you should do.But, looking at these four ratios can get you 90% of the way there in less than 2 minutes.Which questions do you have? Let me know in the comments section.***➕ FollowLong Term Mindsetfor more content like this.Want to master the basics of accounting (for free)?Enroll in our free, 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) →https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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How to analyze a Balance Sheet in <2 minutes.Study these 4 ratios:⚖ 1: Quick Ratio❓ Question: Can the company pay its bills?➗ Equation: Cash + Equivalents + AR / Current Liabilities🔢 Guide: Fragile = <1.0Robust = 1 to 1.5Antifragile = <0.7⚖ 2: Current Ratio❓ Question: How well does the company manage its assets?➗ Equation: Current Assets / Current Liabilities🔢 Guide: Fragile = <0.7Robust = 1Antifragile = >2.5⚖ 3: Debt-to-Equity Ratio❓ Question: How much leverage is the company using?➗ Equation: Total Liabilities / Shareholder Equity🔢 Guide: Fragile = >2.0Robust = ~1Antifragile = <0.7⚖ 4: Goodwill-to-Assets Ratio❓ Question: Is the company growing organically?➗ Equation: Goodwill / Total Assets🔢 Guide:Fragile = >50%Robust = 10% - 50%Antifragile = <10%To be clear, this isn't all of the balance sheet analysis that you should do.But, looking at these four ratios can get you 90% of the way there in less than 2 minutes.FollowLong Term Mindset for more content like this.***Want to master the basics of accounting (for free)?Enroll in our free, 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) →https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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How to analyze a balance sheet in <2 minutes.Study these 4 ratios:⚖ 1: Quick Ratio❓ Question: Can the company pay its bills?➗ Equation: Cash + Equivalents + AR / Current Liabilities🔢 Guide: Fragile = <1.0Robust = 1 to 1.5Antifragile = <0.7⚖ 2: Current Ratio❓ Question: How well does the company manage its assets?➗ Equation: Current Assets / Current Liabilities🔢 Guide: Fragile = <0.7Robust = 1Antifragile = >2.5⚖ 3: Debt-to-Equity Ratio❓ Question: How much leverage is the company using?➗ Equation: Total Liabilities / Shareholder Equity🔢 Guide: Fragile = >2.0Robust = ~1Antifragile = <0.7⚖ 4: Goodwill-to-Assets Ratio❓ Question: Is the company growing organically?➗ Equation: Goodwill / Total Assets🔢 Guide:Fragile = >50%Robust = 10% - 50%Antifragile = <10%To be clear, this isn't all of the balance sheet analysis that you should do.But, looking at these four ratios can get you 90% of the way there in less than 2 minutes.FollowLong Term Mindsetfor more posts like this.***Want to master the basics of accounting (for free)?Enroll in our free, 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) →https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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Balance sheet vs income statement 1️⃣ Definition:- Balance Sheet: A snapshot of a company's financial position at a specific point in time.- Income Statement: A summary of a company's revenues, expenses, and profits over a given period.2️⃣ Main Components:- Balance Sheet: Assets, Liabilities, Equity.- Income Statement: Revenues, Expenses, Net Income.3️⃣ Purpose:- Balance Sheet: Shows the financial health and solvency of a company.- Income Statement: Reveals a company's profitability during a specific time frame.4️⃣ Timeframe:- Balance Sheet: A specific date (e.g., end of a quarter or year).- Income Statement: A specific period (e.g., monthly, quarterly, or annually).5️⃣ Focus:- Balance Sheet: On the company's financial position at a given moment.- Income Statement: On a company's performance over time.6️⃣ Primary Elements:- Balance Sheet: Assets (current and non-current), Liabilities (current and non-current), Equity.- Income Statement: Revenues (sales, interest income, etc.), Expenses (cost of goods sold, operating expenses, etc.), Net Income.7️⃣ Reporting Frequency:- Balance Sheet: Typically reported quarterly and annually.- Income Statement: Can be reported monthly, quarterly, and annually.8️⃣ Regulatory Requirements:- Balance Sheet: Required for financial transparency and often subject to regulatory scrutiny.- Income Statement: Essential for tax reporting and external financial disclosures.9️⃣ Example Items:- Balance Sheet: Cash, Accounts Receivable, Long-Term Debt, Common Stock.- Income Statement: Sales Revenue, Cost of Goods Sold, Operating Expenses, Net Profit. Let's keep learning together!#Finance #BalanceSheet #IncomeStatement #FinancialEducation

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Balance Sheet VS Income Statement

How the Income Statement + Balance Sheet link 🔄 :📃 INCOME STATEMENTShows a company's revenue, expenses, and net income over a period of time (month, quarter, year).📃 BALANCE SHEETShows a snapshot of a company's assets, liabilities, and equity at a point in time (Sept 30th, 2023).🏭 TANGIBLE ASSETSAssets you can physically (car, building). Their value on the balance sheet is DEPRECIATED as operating expenses over the asset's useful life.📜 INTANGIBLE ASSETSAssets you can't physically touch (patent, copyright).Their value on the balance sheet is AMORTIZED as operating expenses over the asset's useful life.➖ Both depreciation and amortization costs are subtracted as operating expenses on the income statement.❌ Financial assets that generate expenses (interest payments on debt) or losses (stock value falls) are subtracted as non-operating expenses on the income statement.💰 Financial assets that generate income (cash generates interest) or profit (stock appreciates) are added as non-operating income on the income statement.➕ Net income generated on the income statement is added to retained earnings on the equity side of the balance sheet.Understanding how the three financial statements link is crucial to gaining a comprehensive view of a company's financial health.Follow Long Term Mindset for more content like this.****P.S. Want to level up your accounting skills? Join us for a FREE webinar on Wed, Feb 14th at 12:00 noon EST.Topic: 10 Metrics Every Investor Must KnowRSVP here: https://lnkd.in/eDeSEXjMIf you found this post useful, please share (repost ♻️) to help make LinkedIn a better platform for all.

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Learn how to create a cash flows statement in 3 minutes 👇 by Josh Aharonoff, CPA This may be one of the most impactful things I’ve learned in my career…Why?Because your statement of cash flows is an IMPORTANT report to produceIt shows where your cash has gone...and if properly attached to your forecast, can tell where you're cash is GOINGIt also helps you conceptualize how the the 3 financial statements are connected.➡️ How do you create a Cash Flows statement?Creating a cash flows statement from scratch is actually a very simple thing to do…And there are 2 ways in which you can produce a statement of cash flows1️⃣ The DIRECT methodThis method is easier to digest, as it shows cash flows in more plain English (ex: cash receipts from customers, cash paid to suppliers).Although it's easier to understand this report, it's much more challenging to create dynamically, and you'd need more information than just your income statement and balance sheet to accurately produce2️⃣ The INDIRECT methodThis method is presented by taking your net income, adding back depreciation & amortization, and then taking the differences in each of your balance sheet accounts.Although it may be tougher to read this report and fully grasp what's happening as compared to the direct method, it's MUCH simpler to produce...and all you need is your profit and loss and balance sheetIn this video, I show you how to produce a cash flows from scratch using the indirect method in just 3 minutes.I use my favorite technique for preparing this statement quickly, and that's by duplicating the balance sheet so that your formulas can be quickly & easily set up#accountingtips #accounting #financeandaccounting #financialaccounting #financialanalysis#finance

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How the Income Statement + Balance Sheet link 🔄The three primary financial statements connect.📃 Income statement:Shows a company's revenue, expenses, and net income over a period of time (month, quarter, year).📃 Balance sheet:Shows a snapshot of a company's assets, liabilities, and equity at a specific point in time (March 31st, 2023).🏭 Tangible assets (you can touch them) on the balance sheet are depreciated as operating expenses over the useful life of the asset.📜 Some intangible assets (you can't touch them) on the balance sheet are amortized as operating expenses over the useful life of the asset.➖ Both depreciation and amortization costs are subtracted as operating expenses on the income statement.❌ Financial assets that generate expenses (interest payments on debt) or losses (stock value falls) are subtracted as non-operating expenses on the income statement.💰 Financial assets that generate income (cash generates interest) or profit (stock appreciates) are added as non-operating income on the income statement.➕ Net income generated on the income statement is added as retained earnings on the equity side of the balance sheet.Understanding how the three financial statements link is crucial to getting gaining a comprehensive view of a company's financial health.FollowLong Term Mindset for more content like this.***Want to master the basics of accounting (for free)?Enroll in our free, 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) →https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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Cash Flow Statement: 8 Yellow Flags 🇳🇺Watch for these warning signs.1: EXCESSIVE STOCK-BASED COMPENSATION - Rule of Thumb: Less than 10% of revenue.2: LARGE CASH OUTFLOWS TO FUND WORKING CAPITAL- Rule of Thumb: Working capital outflows grow at the same rate as revenue.3: DECREASING OPERATING CASH FLOW- Rule of Thumb: Operating cash flow should grow at the same rate as revenue.4: LARGE DIFFERENCE BETWEEN NET INCOME AND FREE CASH FLOW- Rule of Thumb: Net Income and Free Cash Flow should track each other5: CAPITAL EXPENDITURES LESS THAN DEPRECIATION EXPENSE- Rule of Thumb: CapEx should exceed depreciation. 6: LARGE INCREASE IN DEBT- Rule of Thumb: Debt should be used sparingly7: LARGE ISSUANCE OF COMMON STOCK- Rule of Thumb: Common stock should be issued sparingly8: HIGH RELIANCE ON FINANCING ACTIVITIES- Rule of Thumb: Companies should fund themselves from operating cash flowNote: All of these are yellow flags for a reason. There could be good reasons to violate any of these rules, especially temporarily.If you see a yellow flag, investigate it further!Follow Brian Feroldi for more content like this.***Want to master the basics of accounting (for free)?I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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