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Management discussion and analysis

How to Calculate and Identify the Balance Sheet

The balance sheet totals will be calculated already, but here’s how you identify them.

  1. Locate total assets on the balance sheet for the period.
  2. Total all liabilities, which should be a separate listing on the balance sheet.
  3. Locate total shareholder’s equity and add the number to total liabilities.
  4. Total assets should equal the total of liabilities and total equity.

What Do Financial Statements Tell You

Investors and financial analysts rely on financial data to analyze the performance of a company and make predictions about its future direction of the company’s stock price. One of the most important resources of reliable and audited financial data is the annual report, which contains the firm’s financial statements.

The financial statements are used by investors, market analysts, and creditors to evaluate a company’s financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and statement of cash flows.

What Does the Balance Sheet Tell You?

The balance sheet identifies how assets are funded, either with liabilities, such as debt, or stockholders’ equity, such as retained earnings and additional paid-in capital. Assets are listed on the balance sheet in order of liquidity.

Liabilities are listed in the order in which they will be paid. Short-term or current liabilities are expected to be paid within the year, while long-term or noncurrent liabilities are debts expected to be paid in over one year.