The Balance Sheet.ppt

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  • $42,341 increase in net worth $49,400 increase in assets Increase livestock being held for sale could have been capital assets $7,000 increase in liabilities
  • The Balance Sheet.ppt

    1. 1. The Balance Sheet
    2. 2. Assets = Liabilities + Equity
    3. 3. Balance Sheet <ul><li>Is Statement of Financial Position </li></ul><ul><li>Not necessarily the value of a business </li></ul><ul><li>Only an estimate of market Value </li></ul>
    4. 4. Balance Sheet <ul><li>Assets of a business ultimately valued by their ability to generate revenue </li></ul><ul><li>True value determined from actual sale to third party </li></ul>
    5. 5. Primary Financial Statements <ul><li>Balance Sheet </li></ul><ul><li>Earnings Statement </li></ul><ul><li>Cash Flow Statement </li></ul>
    6. 6. Types of Accounts <ul><li>Assets </li></ul><ul><li>Liabilities </li></ul><ul><li>Equity </li></ul><ul><li>Income </li></ul><ul><li>Expenses </li></ul>
    7. 7. Assets Liabilities Equity Assets Liabilities Equity <ul><li>+/- Net Income </li></ul><ul><li>+/- Valuation Changes </li></ul><ul><li>Family living withdrawals </li></ul><ul><li>+ Capital contributions </li></ul>Beginning Balance Sheet Ending Balance Sheet
    8. 8. Account Valuation <ul><li>All accounts have dollar value </li></ul><ul><li>Asset Accounts </li></ul><ul><ul><li>Cost Basis </li></ul></ul><ul><ul><li>Market Value </li></ul></ul>
    9. 9. Current Assets <ul><li>Those that will be realized in cash, sold or consumed in the current operating cycle (1 year) </li></ul>
    10. 10. Current Assets <ul><li>Inventories </li></ul><ul><ul><li>Raised for Sale </li></ul></ul><ul><ul><li>Raised for use in Production </li></ul></ul><ul><ul><li>Purchased for Resale </li></ul></ul><ul><ul><li>Purchased for use in Production </li></ul></ul><ul><ul><li>Page II-32 </li></ul></ul>
    11. 11. Valuation Issues <ul><li>Inventories </li></ul><ul><ul><li>Lower of Cost or Market </li></ul></ul><ul><ul><li>Blending </li></ul></ul>
    12. 12. Non Current Assets <ul><li>Machinery & Equipment </li></ul><ul><li>Breeding Livestock </li></ul><ul><li>Buildings & Improvements </li></ul><ul><li>Land </li></ul><ul><li>Other </li></ul>
    13. 13. Valuation Issues <ul><li>Raised Breeding Stock </li></ul><ul><ul><li>Full Cost Absorption </li></ul></ul><ul><ul><li>Base Value Method </li></ul></ul><ul><ul><li>Page II-36, F-1 </li></ul></ul>
    14. 14. Current Liabilities <ul><li>Those that will be discharged by use of current assets or creation of additional current liabilities in the current operating cycle. </li></ul>
    15. 15. Deferred Taxes <ul><li>Tax liability in event of liquidation </li></ul><ul><li>Liquidation Value –Tax Basis times tax rate </li></ul><ul><li>Page II-24 </li></ul>
    16. 16. Depreciation <ul><li>Allocation of the expense that reflects “using up” of capital assets </li></ul>
    17. 17. Depreciation Original Cost – Salvage Value Years of useful Life
    18. 18. Depreciation Issues <ul><li>Straight line </li></ul><ul><li>Accelerated </li></ul><ul><ul><li>Front end loaded </li></ul></ul><ul><ul><li>Short life span </li></ul></ul><ul><li>Section 179 </li></ul><ul><li>Zero Salvage Value </li></ul>
    19. 19. Depreciation Issues <ul><li>Capitalize or Expense </li></ul><ul><ul><li>Small tools </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Major repairs </li></ul></ul><ul><ul><li>Improvements </li></ul></ul>
    20. 20. Example Farm’s Balance Sheet 62% 60% 64% % in Debt $216.276 $237.447 $195,106 Net Worth $359,590 $363,119 $356,060 Total Liabilities $575,866 $600,566 $551,166 Total Assets Average Ending Beginning
    21. 21. Leverage <ul><li><40% - Financially Sound </li></ul><ul><li>40-70% - Vulnerable </li></ul><ul><li>>70% - Financial Stress </li></ul><ul><li>>100% - Insolvent </li></ul>
    22. 22. Accounts Receivable Sales Revenue 52 weeks = Weeks to Collect Sales/Week Accts. Receivable Sales/Week =
    23. 23. Inventory Cost of Goods Sold Inventory = Inventory Turnover 52 Weeks Inv. Turnover = Average Inventory Holding Time
    24. 24. Accounts Payable Inventory Ave. Inv. Holding Time = COGS/Wk Accounts Payable COGS/Wk = Weeks to Pay

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