
ASSETS (second component of the Balance Sheet)
Assets are economic resources of a business. For example, cash is an asset which allows a company to buy other assets or resources, pay debts a company may have, or pay Operating Expenses. Assets can be classified into two categories; - Current Assets and Fixed Assets.
STEP 8 - Determine Your Weighted Average Selling Price
The process for determining a weighted average selling price is the very same as the process used to determine a weighted average product cost. Moreover, the following calculations must be made;
Part 1 - Calculating Ratios
Part 1 of this section teaches you how to calculate ratios. The most common ratios can be classified into four (4) categories; Liquidity Ratios, Activity Ratios, Leverage Ratios, and Profitability Ratios.
LIQUIDITY RATIOS measure a company's abilities to provide sufficient cash to cover its short term obligations. The most common liquidity ratios include; the current ratio and the quick ratio.
LIABILITIES (third component of the Balance Sheet)
THE BALANCE SHEET SUMMARIZED:
The balance sheet is a tool used to determine or communicate the profitability of a business venture. It consists of four main components, each having sub-components. Below summarizes each component and sub-component of the balance sheet.
Component 1 - the Heading is made up of three (3) parts;
1. The name of the company
2. The type of statement following (Balance Sheet)
3. The Date of the Balance Sheet
STEP 2 - CREATE A LIST OF PRODUCTS WITHIN YOUR PRODUCT LINE
The next step is to make a list of all products you plan to sell within each product line. In other words, list the various models or brand names of products within each major product group or line.
Lets assume John's retail clothing store plans to sell the following brand-name products (IE thirteen (13) different products):
THE HEADING
(first component of the Balance Sheet)
The first component of the balance sheet is the heading. The Heading is extremely important since it tells the readers of the balance sheet three important pieces of information:
1. the name of the company;
2. the type of statement to follow (in this case the Balance sheet);
3. the date at which each account value applies.
SENSITIVITY ANALYSIS
A Sensitivity Analysis is a "what-if" tool that examines the effect on a company's Net Income (bottom line) when sales levels are increased or decreased. For example, the sensitivity analysis can answer the following questions:
BREAK-EVEN ANALYSIS
THE BALANCE SHEET