Is the Balance Sheet shows how much a business worth??

Question

Any idea? arguments? I'm really messed up with this. urgent :(

Answer 1

To get a decent feel regarding the worth of a company, you need to look at the Equity section of the balance sheet, and compare it to the Liabilities section. Since Assets = Liabilities + Equity, if there are a lot of liabilities and very little equity, most of the assets were purchased with debt, which may not be a good thing since there will be a lot of debt service in the future, which will reduce cash flow. On the other hand, if Equity is about equal to the Liabilities, or hopefully larger, then the company is in pretty good financial shape. These are all generalizations of course, since the balance sheet is only a point in time analysis which doesn't necessarily reflect current market conditions, so you need to be careful how much weight you place upon this one measure.

Answer 2

Balance Sheet is Assets/Liabilities at a point in time. Profit/Loss is Revenue/Expenses over time. Worth is in the eyes of the beholder i.e. willing buyer and a willing seller. Your assets and liabilities is obviously a result of trading over time. If for whatever the reason e.g. monopoly then the margins are high and therefore the income stream will build into assets e.g receivables. This allows borrowings (liability) which however will gear and generate an accelerated income and therefore more assets. The brand itself is now an asset i.e. an intangible like "Coca Cola", "Nike". A value is put to it and obviously a face that "only a mother would love (sometimes). Your question is not just accounting: it is economics, psychology, pollitics and a whole host of other issues.

Answer 3

A balance sheet does indeed show that Assets = Equity (Liabilities + Owners Equity).

But, the balance sheet statement has several deficiencies. Because assets are recorded at historical cost (purchase price), they are often far below replacement cost (today's cost). There are also several methods of recording inventory (each will give a different answer). And, pension costs are often estimated. In my opinion, the Balance Sheet is the weakest financial statement; better to look at the Income Statement or Statement of Cash Flow.

Answer 4

Yes. Assets minus Liabilities equals Net Worth.

Income Statements (or Profit & Loss statement) shows Gross Revenue minus Cost of Goods Sold equally Gross Margin. Gross Margin minus General Operating Expenses equals Net Profit or Loss (the bottom line) which is then "transferred" over to the Balance Sheet as either increase or decrease in Net Worth

Answer 5

The balance sheet equation shows assets = liabilities + capital. Capital is the accounting value of the business, but not necessarily the market value.

Answer 6

Balance sheet just tells you what is in your accounts. There's no math done aside from ensuring the debits balance with the credits. You need a profit and loss statement.

Answer 7

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Answer 8

No ..It shows income/loss