The balance sheet is the document where assets, liabilities, and equity of a particular company or a person are recorded. It’s a crucial financial statement wildly used in accounting, investing, analytics, and other areas. In this article we’ll explain what a balance sheet is, cover its essential components, and answer the most common questions.
Assets, liabilities, and equity are three core accounting concepts. It’s impossible to evaluate a company properly without a thorough knowledge of them. The word “equity” has many meanings but, in this article, we focus on equity in the general accounting sense, although we briefly cover other kinds of equity too.
Assets, liabilities and equity are three basic building blocks that form the balance sheet equation and any investor should have a deep understanding of what they mean. In this article, we’ll explain what liabilities are and we’ll also provide a real example using a balance sheet of a public company.
The main purpose of any investment is to generate more money than the amount invested, the time it takes to do so is called the payback period (PBP) in capital budgeting. Payback period is wildly used by investors and entrepreneurs when they consider to open a new enterprise, invest in an existing business, or when they try to pick the best opportunity among two or more possible options.
For many years, the majority of economists based their financial theories on a few basic assumptions: all market participants are perfectly rational (investors aren’t emotional at all), and they are also free from any biases or information processing errors. The real-life and practical economy showed that these assumptions don’t work in many cases and people tend to behave irrationally from time to time.
There are two main types of stocks on the public market: common and preferred. Why do we need to have two distinct types of shares and what’s the difference between them? In this article, we’ll take a look at these two types of stocks (shares) to figure out which one would be a better choice for an investor.
Most of the people can read nowadays (the literacy level is close to 99%), yet reading an annual report of a company is a different story. It can be very confusing for an investor to figure out what are the key things to look after and what information is worth reading.
Return on Assets (ROA) is one of the key fundamental indicators used by financial analysts. ROA can give you a lot of hints on what’s going on with a particular company and how effective it’s managed. In this article, we’ll explain what ROA is with some simple examples, and show how this financial ratio can be used in the analysis of a business’ profitability.