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A Presentation by,
• Balance Sheet is a Financial Statement which presents
to the analyzer the Asset and Liabilities of the given
Organization or person
• It is made for analysis of the financial position of the
organization, it is being followed by many companies
around the world
• Investors analyze Balance sheet along with P/L Account
4/25/2014 Balance Sheet Anaysis 2 of 9
Liabilities Rs. Assets Rs.
Current liabilities: Current Assets:
Bank overdraft Cash in hand
Bills Payable Cash at Bank
Sundry creditors Bills Receivable
Outstanding Expenses Short Term Investments
Unearned Income Sundry Debtors
Fixed Liabilities: Closing Stock
Long Term loans Prepaid expenses
Reserves Accrued Income
Capital Long Term Investments
Add: Net profit Fixed Assets:
Less: Drawings Furniture
Less: Income Tax Loose Tools
Less: Life Insurance Premium Motor vehicle
Plant & Machinery
Land & Buildings
Balance Sheet as on __/__/____
4/25/2014 Balance Sheet Anaysis 3 of 9
• There are three different methods,
• Vertical Analysis: Analyzing a single period financial statement
works well with vertical analysis.
• Horizontal Analysis: Horizontal analysis is the comparison of
data sets for two periods.
• Ratio Analysis: Ratios express a relationship between two more
financial statement totals, and compare to budgets and industry
benchmarks. Five common categories of ratios exist: liquidity,
asset turnover, leverage, profitability and solvency.
4/25/2014 Balance Sheet Anaysis 4 of 9
• During the analysis, it is assumed that total assets, total
liabilities, total equity & revenue in the financial
statements constitute 100%.
• The other values in the financial statements are
compared with these basic captions
• It is then expressed in percentage of the basic caption
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• Involves comparison of a financial ratio, a benchmark, or
a line item over a number of accounting periods.
• Horizontal analysis allows the assessment of relative
changes in different items over time.
• It also indicates the behavior of revenues, expenses,
and other line items of financial statements over the
course of time.
• Accounting periods can be two or more than two periods.
Accounting period can be a month, a quarter or a year.
• Horizontal analysis can be performed in one of the
following two different methods i.e. Absolute comparison
or Percentage comparison.
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• Liquidity Ratios
• Current Ratio: Current Assets/Current Liabilities
• Quick Ratio: Quick Assets/Current Liabilities
• Capital Structure Ratios
• Debt-Equity Ratio: Total Debt/Shareholder’s Equity
• Debt to Total Capital Ratio: Total Debt/Total Assets
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• Profitability Ratios
• Gross Profit Margin:
(Gross profit/Sales)*100= ((Sales – cost of goods
• Return on Assets: Net profit after taxes/ total assets
• Activity Ratios
• Inventory Turnover Ratio: Cost of goods sold/average inventory
• Debtors Turnover Ratio: Credit Sales/Average debtors
4/25/2014 Balance Sheet Anaysis 8 of 9
4/25/2014 Balance Sheet Anaysis 9 of 9