Clean Balance Sheet

  

A wonderfully boring balance sheet. No shenanigans. Nothing fishy. Plenty of cash. Probably not a lot of debt, if any. Nothing fancy. A third grader (albeit one with future accounting ambitions) would understand this one.

Clean balance sheets are often a sign of a healthy company. If "nothing clever" was needed to raise cash for the company in the past or for current operations, odds are good the company has a good business runnin'.

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Finance: What is a Balance Sheet?47 Views

00:00

finance- a la shmoop. what is a balance sheet? well it's a snapshot. a financial

00:09

reckoning of what you own ,and what you owe at a given moment in time. well note

00:14

that a balance sheet is divided into columns like this. on the left are good [balance sheet pictured]

00:19

things like things you own. on the right side are things you owe like debts or

00:24

obligations you have to pay off. well think for the balance sheet of little

00:28

brother Inc. you have total assets of $142 with current assets of a hundred

00:33

bucks .80 bucks of that current asset set is cash and twenty dollars is an IOU

00:38

from the tooth fairy ie dad ,who woke you up last night [clown next to child's bed]

00:41

replacing the tooth and since you're old enough you just winked and he said yeah

00:45

I'll get you a twenty from my wallet in the morning. note that if he'd said I'll

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get it for you a year and change from now. it wouldn't be a current asset it

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would be a long-term asset, because current means that a promise or a

00:58

product or whatever turns into cash within a year. you mowed the lawn for the [assets listed]

01:02

summer for mrs. garden bottom and billed her $500. she paid you four hundred

01:07

ninety dollars and still owes you ten bucks. that money lives in your balance

01:11

sheet on the assets side as an account receivable. you have four hundred ninety

01:16

seven little blue marbles as your only asset which your friend Billy has

01:19

offered you tons of times to buy for twenty four dollars so you can hold that [kids exchange marbles and money]

01:24

amount as inventory. it's an asset. since you know you deal in marbles regularly.

01:28

and you paid ten dollars for ten year rights to enter your sister Jeannie's

01:32

room anytime you want. you still have eight years to go on that paper so you'd

01:36

depreciate its value at a dollar a year worth eight bucks today. total everything [balance sheet shown]

01:40

up and you have that one hundred forty two dollars in assets on your own

01:44

personal balance. sheet okay so what about your liabilities. well you have

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total liabilities of a hundred dollars. you owe Joe lunch bully thirty bucks to

01:53

learn why you'll stop hitting yourself. or rather to stop doing so you owe him

01:58

thirty bucks tomorrow and you know you'll owe him sixty bucks a year in

02:02

change from now maybe more in the future and maybe not if you grow and put on a [ laughing boy is offered cash]

02:07

few pounds. but you are conservative financially so you reserve that 60 bucks

02:10

as if it's a certain long-term debt, so it goes down there on

02:15

line 13 .you borrowed ten bucks from your boo

02:18

Amy the auditor for lunch she actually submitted to you an invoice. albeit

02:22

romantically. so you have ten bucks on line eight there .so you have one hundred

02:26

forty two dollars in total assets and a hundred dollars in total liabilities, but

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wait they don't balance. oh no what shall we do ?well a balance sheet accounts for

02:35

this it's called ale and it stands for assets minus liabilities equals equity. [man gives thumbs up]

02:41

well you have assets $142 we just outlined and you can subtract your

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liabilities which we just outline of a hundred bucks and you have net equity

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value to your life of $42. it looks like little brother Inc doesn't have to worry

02:55

about filing for bankruptcy anytime in the near future which is good because

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with Joe lunch bully in the picture, life is hard enough as it is. [kid frowns as bully pushes his own hand in his face]

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