Please read each passage below, I need a few sentences in response to each part. Please use at least one source. Please cite the reference(s) properly. Part 1 and 2 can be on the same page, however, please keep them separate by labeling them Part 1 and Part 2. No Title Page Needed DUE TOMORROW 2/14/22 by 6PM CST
PART 1 AA
The balance sheet provides information that includes a company’s assets, liabilities, and capital for a specific period of time.
Assets = Liability + Equity (Epstein, 2014) There are current and long-term assets. The investments are included on the debit side of the balance sheet.
Liabilities are what the company owes. These are included on the credit side of the balance sheet. There are current and long-term liabilities.
Equity is what is left after the liabilities are subtracted from the assets.
A balance sheet has a date that shows the state as of the date it is presented. Assets and liabilities fluctuate over time, so it is a good idea to look at a balance sheet that captures a historical period of time if you are looking at it to measure a company’s financial health.
A common-sized balance sheet is useful when comparing smaller companies to larger ones. It uses percentages as opposed to dollars. “A common-sized balance sheet enables easier comparisons of smaller to larger companies. It also gives users a different perspective for comparing financial results from period to period.” (Epstein, 2014) They show the current and last fiscal year’s data in percentages. Dollar amounts can also be added.
Domino’s Pizza’s balance sheet shows the past three years. It is not a common-sized balance sheet as it uses dollar amounts only. I noted that the equity is negative as the liabilities are much higher than the assets.
Epstein, L. (2014). Financial decision making: An introduction to financial reports. Zovio. Retrieved from: https://content.uagc.edu/
PART 2 HH
The balance sheet provides a snapshot of the company’s financials in time. The basic information is the company’s assets, liabilities, and equity. The assets section is made up of both current and long-term assets. Assets are what the company owns. Current assets can be expected to be used within the next twelve months, while long-term assets are anything that will not be used in that timeframe. Liabilities are anything the company owes. Equity is the share that is claimed by the owners. All three of the categories are made up by many different types of financials. An asset, for example may be cash, inventories, or even accounts receivables.
One thing that stands out about the balance sheet is that debits can be additions and credits can be subtractions. This is based on the type of account that is being addressed. It is important to note that everything must be in balance. This means if something is taken in (such as inventory), something else must be taken out (such as cash).
According to Epstein, common-sized balance sheet can be used to compare different companies to one another. This balance sheet can be used to compare any company to another, even if there is a size difference to the organizations. The numbers are represented in percentages on the common-size balance sheet to give perspective (2014).
Epstein, L. (2014). Financial decision making: An introduction to financial reports. Retrieved from https://content.uagc.edu/
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