The Balance Sheet Discussion:
Referencing this week’s readings and lecture, what information is provided in the balance sheet? What is a common-sized balance sheet and how do you create one? For your final project company, does anything stand out on the balance sheet?
Respond to at least two of your classmates’ posts.
Required Resources Text
Epstein, L. (2014). Financial decision making: An introduction to financial reports [Electronic version]. Retrieved from https://content.ashford.edu/ Chapter 2: The Balance Sheet Articles
Ford Motor Company. (2014). Ford Motor Company 2012 annual report (Links to an external site.)Links to an external site.. Retrieved from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
Harper, D. (n.d.). Financial statements: The system (Links to an external site.)Links to an external site.. Investopedia. Retrieved from http://www.investopedia.com/university/financialstatements/financialstatements2.asp
EDWARDS DISCUSSION PLEASE REPLY:
A balance sheet shows what money has previously been spent on a daily, weekly, monthly or yearly basis along with future payments and it shows what money has been credited to the account. It also shows anything that an organization owns or controls such as properties, equipment, securities, prepaid expenses and inventory. Assets can be used right away and later which can be cash or stocks, but stocks or securities that are used long term are more likely to be goods instead of currency. Liabilities are included as well, which can include loans, income taxes that have to be payed and wages. Liabilities can also be broken down on a balance sheet where they are used for short and long term.
Liabilities that have to be paid right away or within a year are considered creditor accounts, while long term liabilities can consist of pensions, long term loans, and capital leases. “Equity indicates the proportion of a company’s assets that can be claimed by owners and can be in the form of stockholders’ equity, common stock, preferred stock, retained earnings and treasury stock, and additional paid-in capital” (Thermond, 2014, para. 3). A common-sized balance sheet is similar to a balance sheet, but it includes percentages for a company’s assets, equity and liabilities. It can be created by “developing a formula to divide each line item in the assets section by total assets and developing a formula to divide each line item in the liabilities and equity section by total liabilities and equity” (Epstein, 2014, p. 2.3). On the Electronic Arts balance sheet, the debts stand out because they are in the hundred million range over a 5-year period and their cash stands out because it is in the billions.
Epstein, L. (2014). Financial decision making: An introduction to financial reports. Retrieved from https://content.ashford.edu/books/AUOMM622.14.1/sections/sec1.3?search=equity#w10704 (Links to an external site.)Links to an external site.
Thermond, J. (2014). Mastering the balance sheet can make or break a startup. Forbes. Retrieved from http://www.forbes.com/sites/xseedcapital/2014/03/27/mastering-the-balance-sheet-can-make-or-break-a-startup/ (Links to an external site.)
QUENTINS DISCUSSION PLEASE REPLY:
The information provided on the balance sheet are the assets, liabilities, and the equity. “Assets can be grouped into current assets and long term assets” (Cain, 2018, Week 2 Lecture), which can be those used within certain timeframes, short or long. Liabilities are those items that the company owes that include short (monies due within 12 months) and long-term (due more than 12 months) items as well, like assets (Epstein, 2014). Equity “shows the claims that owners have against the assets of the company” (Epstein, 2014, p. 2.1). In other words, equity is the portion of the company that stakeholders can claim via “stockholder’s equity, common stock, preferred stock, retained earnings and treasury stock, and additional paid-in capital” (Cain, 2018, Week 2 Lecture).
The common-sized balance sheet is a more concise sheet that shows the comparison based on percentages than dollars. It shows both percentages and dollars as they relate to the assets, liabilities, and the equity accounts. Any line item is directly compared to the value of total assets, liabilities, and equity. This balance sheet is created by “Develop(ing) a formula to divide each line item in the Assets section by Total Assets… then develop(ing) a formula to divide each line item in the Liabilities and Equity section by Total Liabilities and Equity” (Epstein, 2014, p. 2.3). For Nike, their liabilities have significantly been lower than the total assets over a four year period. There was a slight drop experienced in 2016 for the assets line, but an increase is evident for 2017.
Cain, M. (2018). Week 2 Lecture. Retrieved from https://ashford.instructure.com/courses/21789/pages/week-2-weekly-lecture?module_item_id=1104016
Epstein, L. (2014). Financial decision making: An introduction to financial reports. Retrieved from https://content.ashford.edu/books/AUOMM622.14.1/sections/sec1.3?search=equity#w10704
Nasdaq. (2018). Nike Company Financials. Retrieved from https://www.nasdaq.com/symbol/nke/financials?query=balance-sheet