HOW TO READ A BALANCE SHEET💻
[THREAD]
[THREAD]
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A balance sheet is a financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.
It's important to understand because it provides insight into a company's financial health.🏥
A balance sheet is a financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.
It's important to understand because it provides insight into a company's financial health.🏥
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To start reading a balance sheet, look at the assets section.
This will show you what the company owns and how it's financed.
Current assets, such as cash and accounts receivable, are listed first and are considered most liquid. (Easily converted into cash)📊
To start reading a balance sheet, look at the assets section.
This will show you what the company owns and how it's financed.
Current assets, such as cash and accounts receivable, are listed first and are considered most liquid. (Easily converted into cash)📊
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Next, look at the liabilities section.
This will show you what the company owes, including short-term and long-term debts.
The difference between assets and liabilities is shareholders' equity, which represents the ownership interest in the company.💻
Next, look at the liabilities section.
This will show you what the company owes, including short-term and long-term debts.
The difference between assets and liabilities is shareholders' equity, which represents the ownership interest in the company.💻
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To get an idea of the company's liquidity, look at the current ratio, which is current assets divided by current liabilities.
A ratio of 1 or higher is considered healthy.🎯
To get an idea of the company's liquidity, look at the current ratio, which is current assets divided by current liabilities.
A ratio of 1 or higher is considered healthy.🎯
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Another important ratio to look at is the debt-to-equity ratio, which is total liabilities divided by shareholders' equity.
A high ratio indicates a company is heavily financed by debt, which can be risky.💸
Another important ratio to look at is the debt-to-equity ratio, which is total liabilities divided by shareholders' equity.
A high ratio indicates a company is heavily financed by debt, which can be risky.💸
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A balance sheet is important to read and understand because it provides insight into a company's financial health and its ability to pay debts and generate cash flow.
It's also a crucial tool for analyzing a company's performance over time.⏰️
A balance sheet is important to read and understand because it provides insight into a company's financial health and its ability to pay debts and generate cash flow.
It's also a crucial tool for analyzing a company's performance over time.⏰️
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Remember, reading a balance sheet is just one aspect of researching a company before investing.
It's important to also read income statements, cash flow statements, and other financial reports to get a complete picture.📊
Remember, reading a balance sheet is just one aspect of researching a company before investing.
It's important to also read income statements, cash flow statements, and other financial reports to get a complete picture.📊
What else would you add or like to know about a balance sheet?
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