The balance sheet

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ابراهيم العناني

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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

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

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