The financial statement, also known as the balance sheet, is one of the most important documents. Its main function is to display the relationship between the company's assets and liabilities, which must always be equal to each other. In simple terms, the total value of all the company's assets must be equal to the total value of all its liabilities. It is important to note that each element of the organization's property has its own sources of origin.
Equity. Gross and net assets
A company's equity is the net worth of all liabilities, which is equivalent to the remainder of the firm after all its debts have been paid off.
The total value of an enterprise's assets is equal to the sum of its liabilities and equity, that is, the value of all its property with the full fulfillment of all financial obligations.
A company's equity is defined turn leads into sales with overseas chinese in worldwide data as the difference between the value of its assets and the total amount of its liabilities, which corresponds to the funds that can be used by the firm without resorting to external sources of financing.
It is important to note that the difference between the value of the company's assets and its liabilities should be shown on the balance sheet as equity. It is also the organization's net assets, that is, the share of resources belonging to its owners. The total value of the company's net assets, in turn, reflects the total value of its gross assets, that is, the value of all assets before deducting all liabilities.
Gross and net assets
Liquidity ratios
The order of placement of assets and liabilities in the balance sheet is determined in such a way as to provide a clear picture of the financial condition of the company. They are arranged in the course of increasing or decreasing their liquidity and urgency of execution, respectively.
The order of current liabilities over long-term and equity on the balance sheet is standard and widely used in the financial reporting of organizations. This is because this option reflects the company's assets and liabilities arranged in a natural hierarchy, with short-term resources having a higher priority than long-term ones. In addition, indicating current liabilities first allows investors and other stakeholders to more quickly assess the financial position of the company. For example, if the share of short-term resources significantly exceeds the share of long-term resources, this may indicate difficulties in managing cash flows or the risk of the company's inability to meet its cash promises on time.