Category: Money Tips Date: 2006-11-21
An important feature of the balance sheet of assets and liabilities is the must have total assets with total liabilities and shareholders equity equal to the sum. With a basic formula, namely:
Assets = (current liabilities + long-term liabilities) + shareholder's equity
In the balance sheet, investors can seize the three indicators as the basis for an objective analysis of companies. No need to worry a lot of numbers.
The first aspect is reflected in corporate financial structure, whether it is reasonable indicators:
a. Net assets ratio = Total equity / total assets. The index generally about 50% is better description corporate financial structure is not entirely too rational, too low a serious note liabilities;
b. rate = net fixed assets net value of fixed capital / fixed assets. The index should in general be more than 75% of the good, the indicator reflects the fixed assets of the recency and productivity.
The second area is a reflection solvency indicators:
a. Current Ratio = current assets / current liabilities. in order to maintain a 2:1 level of the general good, too reflects the business may be a large backlog of receivables or inventory, or may be raised by issuing equity capital has not been fully put into operation .
b. Quick Ratio = (Current Assets - Inventories - Prepaid expenses - deferred expenses) / current liabilities. The index is a measure of business ability of a commonly used short-term compensation targets. generally 1:1.5 between the high showing that the funds may exist sluggish behavior., but must also characteristics of the various sectors, can not be generalized.
The third aspect is reflected in the net assets of the shareholders of the Company owned interests. Whose indicators are net assets per share = Total equity / total × stock face value of the shareholders. Generally speaking, the higher the index, the value per share, the higher the .
Based on the above, and then a comprehensive analysis of corporate financial structure and solvency, in terms of total assets from the enterprise's business scale of operation, from the equity growth rate higher than the growth rate of total assets to see the improvement of corporate financial strength. From the statutory capital fund over the amount of capitalization indicates that enterprises will be organized by a good level of dividend distribution scheme. and so on. At the same time must be combined with the characteristics, such as "inventory" column, some companies showing that a product unmarketable, and some enterprises such as real estate, there may be development of base and in the commercial housing projects, once the project opened successfully, they will produce good results. In short the balance sheet reflects the company financial information is one of the companies was required to release one of the three major financial statements, its focus of the company's capital strength.
