{"id":3252,"date":"2018-12-24T09:00:08","date_gmt":"2018-12-24T03:30:08","guid":{"rendered":"http:\/\/capitalante.com\/?p=3252"},"modified":"2019-02-17T10:38:51","modified_gmt":"2019-02-17T05:08:51","slug":"how-to-analyse-the-balance-sheet-of-a-company","status":"publish","type":"post","link":"https:\/\/capitalante.com\/how-to-analyse-the-balance-sheet-of-a-company\/","title":{"rendered":"How to Analyse the Balance Sheet of a Company"},"content":{"rendered":"<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Sufficient knowledge of various financial records like balance sheet, profit and loss account, free cash flow etc. help an investor to know the financial condition of a company and then he may decide accordingly. Among all the financial statements\/records the most important and vital part is the balance sheet. In this column, we will understand the basics of the Balance sheet and how to <g class=\"gr_ gr_224 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling multiReplace\" id=\"224\" data-gr-id=\"224\">analyse<\/g> the balance sheet of a company.<\/span><\/p>\n<h6><span style=\"color: #0000ff;\"><strong><span style=\"font-family: georgia, palatino, serif; font-size: 18pt;\">What is <g class=\"gr_ gr_205 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins doubleReplace replaceWithoutSep\" id=\"205\" data-gr-id=\"205\">balance<\/g> sheet?<\/span><\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">As the name itself carries the meaning, a balance sheet is a summarized description of all the financial transactions made by a company in a certain period. The balance sheet of a company expresses all the assets a company possesses. The asset includes liquid money, land property, factory, machinery, the investment made in different sectors. The balance sheet also includes all liabilities like loans, accounts payable, mortgages, deferred revenues and a company\u2019s accrued expenses done at the last of a financial year.<\/span><img loading=\"lazy\" src=\"http:\/\/capitalante.com\/wp-content\/uploads\/2018\/09\/5001140318-1.jpg\" alt=\"How to Analyse the Balance Sheet of a Company\" width=\"1651\" height=\"2063\" class=\"aligncenter size-full wp-image-4055\" srcset=\"https:\/\/capitalante.com\/wp-content\/uploads\/2018\/09\/5001140318-1.jpg 1651w, https:\/\/capitalante.com\/wp-content\/uploads\/2018\/09\/5001140318-1-240x300.jpg 240w, https:\/\/capitalante.com\/wp-content\/uploads\/2018\/09\/5001140318-1-768x960.jpg 768w, https:\/\/capitalante.com\/wp-content\/uploads\/2018\/09\/5001140318-1-819x1024.jpg 819w\" sizes=\"(max-width: 1651px) 100vw, 1651px\" \/><\/p>\n<p>Source: <a href=\"https:\/\/beta.bseindia.com\/bseplus\/AnnualReport\/500114\/5001140318.pdf\" target=\"_blank\" rel=\"noopener\">Titan company Balance Sheet<\/a><\/p>\n<h6><span style=\"color: #0000ff;\"><strong><span style=\"font-family: georgia, palatino, serif; font-size: 18pt;\">Why Balance Sheet Is Important?<\/span><\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">The balance sheet of a company is an overview of the financial condition of the company. By checking the balance sheet of a company you can judge its business model i.e., how the company earns money and also the company\u2019s reliability. After making the fundamental analysis i.e., compounded sales growth, debt ratio, return on equity etc. and qualitative analysis i.e., business model, management of the company, competitive advantage, entry barrier etc. most investors overlook or ignore the balance sheet of the company they invest in. All these above-mentioned factors are important. But only these factors are insufficient to provide a clear view <g class=\"gr_ gr_297 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"297\" data-gr-id=\"297\">about<\/g> the assets and liabilities of a company. Here comes the role of the balance sheet. <\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">The balance sheet of a company highlights the financial health of a company. It is needless to say how financial health matters to run the business in the long run. The balance sheet is <g class=\"gr_ gr_296 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"296\" data-gr-id=\"296\">the overview<\/g> of the accounts of the business. Balance sheet speaks about how much a company earns, what its revenue source is, how it runs the day-to-day business, how much debt it has in the market, how much it needs to collect from customers, how much cash and inventory it possesses, whether the company has suffered any loss in the previous year or current year.<\/span><\/p>\n<ul>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Read also:<span style=\"color: #ff0000;\">\u00a0<a href=\"https:\/\/www.investopedia.com\/slide-show\/reading-the-balance-sheet\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\">5 Tips For Reading A Balance Sheet<\/a><\/span><\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Read also:<span style=\"color: #ff0000;\">\u00a0<a href=\"https:\/\/www.investopedia.com\/university\/fundamentalanalysis\/fundanalysis7.asp\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\">Fundamental Analysis: The Balance Sheet<\/a><\/span><\/span><\/li>\n<\/ul>\n<h6 style=\"text-align: center;\"><span style=\"color: #0000ff;\"><strong><span style=\"font-family: georgia, palatino, serif; font-size: 18pt;\">How to <g class=\"gr_ gr_227 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling multiReplace\" id=\"227\" data-gr-id=\"227\">analyse<\/g> the balance sheet of a company<\/span><\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">As a sincere investor when you <g class=\"gr_ gr_228 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling multiReplace\" id=\"228\" data-gr-id=\"228\">analyse<\/g> or check the balance sheet of a company, you should consider the following points.<\/span><\/p>\n<ul>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">What assets a company possesses.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">What liabilities a company owes.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">How much debt a company has to pay in the short term as well as long term.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">How much debt a company has relative to its equity.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">What the tendency is of the customers to pay their bills.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Whether short-term cash or the money to run the day-to-day expenses of the business faces any shortfall or it is adequate for the company.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">What the percentage is of the tangible asset i.e., factory, plants, units, machinery, etc. in the company\u2019s total valuation.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">How much time it takes to clear out the inventories.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Whether research or development budget to get patent shows upward results.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">How much interest along with debt capital has to be repaid to any bank or financial institution in the short term.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">What percentage of the profit the company spends to give dividends to its shareholders. And what percentage of the profit is invested in the expansion of the business or to buy machinery and other assets?<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #000000; background-color: #ffffff;\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\">In order to check out the above-mentioned aspects of any company, you need to know the above-mentioned terms.<\/span><\/span><\/p>\n<h6 style=\"text-align: center;\"><span style=\"color: #0000ff;\"><strong><span style=\"font-family: georgia, palatino, serif; font-size: 18pt;\">Shareholder\u2019s Capital i.e., Total Share Capital, Reserves &amp; Surplus &amp; Total Shareholder Fund<\/span><\/strong><\/span><\/h6>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Total Share Capital<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">To establish a business or to enlarge the existing business a company or an organization requires capital or fund. Then the company can raise the fund in two ways. The company can withdraw loans from a bank or a financial institution. Otherwise, the company can leave its ownership right partially for the investors from whom the fund raised in <g class=\"gr_ gr_283 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins doubleReplace replaceWithoutSep\" id=\"283\" data-gr-id=\"283\">line<\/g> of capital. By giving them the ownership right the company allows them to decide the company\u2019s decisions accordingly.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">The money which is raised <g class=\"gr_ gr_285 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"285\" data-gr-id=\"285\">from<\/g> the shareholders is called share capital. The amount of share capital may increase time to time. A company may raise more share capital further reducing its stake in the company in <g class=\"gr_ gr_284 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins replaceWithoutSep\" id=\"284\" data-gr-id=\"284\">line<\/g> of the fund. When the money raised from the public by reducing the stake is called equity financing. Otherwise, when the money is raised in the form of debt from the banks or financial institutions it is called debt financing.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Reserves and Surplus<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">A company makes its reserves and surplus by accumulating profit after the company distributes its profit among the shareholders. Actually, reserves and surplus are accumulated over years with the profit. A company uses its reserves and surplus for the expansion of its business like buying new plants and machinery, acquisitions of another plant or machinery, increase in production and sells etc. A company may use its reserves and surplus for any emergency or unforeseen problems. In some cases, when a company decides not to use the fund for the future, it issues reserves as bonus shares. <\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">An investor may check a company which is in a growing mode of gathering more and more reserves. If it is so, this is a good company for investment. A decline in reserves during any <g class=\"gr_ gr_278 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling\" id=\"278\" data-gr-id=\"278\">financial<\/g> year may be for three reasons, the company has issued bonus shares or has bought new assets or has made an acquisition. If these three factors are not the reasons for the decrease in reserves and surplus, it is suggested not to invest in such a company.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Total shareholder\u2019s Fund<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Share capital raised by a company, reserves, and surplus all these three elements constitute total shareholder\u2019s fund. A shareholder becomes the owner of the company partly. So, he or she is the owner of the respective company. Further, that shareholder remains responsible for any kind of profit or loss of the company.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Shareholder equity<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Here another term arises that is shareholder equity. Shareholder equity is the net value of the company\u2019s total assets after subtracting <g class=\"gr_ gr_256 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling multiReplace\" id=\"256\" data-gr-id=\"256\">its<\/g> all debts or loans i.e., liabilities if any. Shareholder equity expresses the financial health of a company. If the shareholder equity is satisfactory or remains increasing the company is considered a good bet for investment. Shareholder equity is a vital column in the balance sheet of a company.<\/span><\/p>\n<h6 style=\"text-align: center;\"><span style=\"font-family: georgia, palatino, serif; font-size: 18pt; color: #0000ff;\"><strong>Assets<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">We can understand assets &amp; liabilities easily with an example. Let\u2019s assume you want to set up a restaurant, but you do not have enough money. In this condition, you are left with two options. The first option is you may borrow the capital from an investor and in return, you may allow him an ownership right via equity. The second option is you may go to a bank for a loan and apply for a loan. In that case, the bank authority will ask you to submit the current status of your financial condition. Then you will table all the documents like savings account statement, investment record in bonds, equities, mutual fund, real estate, cars, furniture, computers, and counting. <\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">You will have to write down all the mortgages, student loan, etc. if any. Finally, subtracting between assets and liabilities, you will calculate your net worth. This is your balance sheet, the detailed description of everything you possess. After you submit your balance sheet, the bank will calculate your creditworthiness. On being satisfied with you, the bank will provide you with a business loan.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">While analyzing the balance sheet of a company you need to consider the tangible and intangible assets of the respective company.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Tangible assets<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Every company is engaged in either <g class=\"gr_ gr_268 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins replaceWithoutSep\" id=\"268\" data-gr-id=\"268\">production<\/g> of goods or it provides services of any kind. To produce the goods each company is required plants, machinery, etc. And if it wants to provide services it needs <g class=\"gr_ gr_267 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-del replaceWithoutSep\" id=\"267\" data-gr-id=\"267\">a space<\/g>. The plants, machinery, etc. or the office space a company owns are all together called assets of a company. <\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">There are two types of assets namely Tangible and Intangible. Tangible assets are those things that maintain physical existence such as plants, machinery, office space, inventory etc. Fertilizer production, infrastructure, Galvanized Iron and steel production, automobiles or engineering works and many more like these companies have large tangible assets. So, while searching for a company you need to consider the asset turnover ratio. Asset Turnover Ratio is a measurement scale that checks how efficiently a company makes good use of its assets to yield earning. If the company performs well in this case of tangible property, you can hold that the company owns a class management team.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Intangible Asset<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Brand reorganization, corporate reorganization, product quality distribution network, superior customary support etc all these are considered the intangible assets of a company.\u00a0 The brand value or name of any company is in the billions of money. A portfolio of brand influences the sales and growth of the company in many ways. It is a competitive advantage than its peer companies.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Let\u2019s understand this with an example. Whenever we talk or think about adhesive, the first names come to our mind are Fevicol, Fevistick, Fevikwik, m-seal, Dr. Fixit etc. All these are brands of Pidilite industries. The products of Pidilite Industries possess <g class=\"gr_ gr_233 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-del replaceWithoutSep\" id=\"233\" data-gr-id=\"233\">a superior<\/g> quality. The company maintains a vast distribution network and superior customer service to establish this company as a market leader in the adhesive Sector or Industry.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Again, whenever we talk or think about Trolly or casual Bags the first names come to our mind are Aristocrat, Skybags etc. All these are brands of VIP industries. So, you need to consider these factors before making an investment in a company.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Non-Current Assets<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Non-current assets are those which are inevitable instruments for the successful running of a business. They include permanent assets like property, land, factory, machinery, plant, equipment etc. Since this type of assets <g class=\"gr_ gr_218 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"218\" data-gr-id=\"218\">decline<\/g> in value because of depreciation, companies with large Non-current assets are considered risky.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Current Assets<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Liquid cash or anything that can be converted into cash within a short-term is called Current assets. Current assets include cash in hand, short-term bonds, accounts receivable, inventory and interest due within a year. A company should own sufficient current assets to fulfill its current liabilities. If a company has insufficient current assets to meet its current liabilities it may have to face a risk of liquidity. It means the company is unable to pay its short-term obligations and may have to <g class=\"gr_ gr_240 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"240\" data-gr-id=\"240\">be default<\/g> on its payments.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Capital Work in Progress<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">A company runs in the path of an ongoing entity. It constantly buys assets of tangible or intangible nature to expand its business. There are times when an asset remains incomplete (such as a factory under construction). In such a situation, all the costs incurred on that asset are moved to an account called capital work in progress. When these assets get ready for use, the entire amount in capital work in progress turns into a part of that asset.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">It is important for a company to create more assets to expand its business. If capital work in progress constitutes a large part of the total assets, it means that the capital invested in the asset is stuck and the asset in an unproductive one.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Inventory<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">It is the stocks or ready to sell products a company owns. A company with large inventory supplies its products at the time of sale. It is considered to be the portion of a company\u2019s assets that are ready or will be ready\u00a0for sale. Inventory data is important for a consumer durable sector i.e., garments, ornaments, mobile, gadgets, jewelry sector. Our country has many festivals throughout the year. Companies with huge inventories offer a sale on discount on several items. They can do so because they have available inventories to fulfill such a huge demand during the festive seasons. That is why inventories are vital and fruitful for such type of companies.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Trade Receivables<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">A company has to allow credits to its customers for a situation basis. Then, later the company collects the dues. This money to be collected is called trade receivables. A company should be able to collect its parables within time. The trade receivables should flow uninterruptedly.<\/span><\/p>\n<h6 style=\"text-align: center;\"><span style=\"color: #0000ff;\"><strong><span style=\"font-family: georgia, palatino, serif; font-size: 18pt;\">Provisions, Payable and Liabilities<\/span><\/strong><\/span><\/h6>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Long Term Provisions<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">A company maintains funds to meet any unforeseen events and expenses. It may be repairs and maintenance of machinery or property, depreciation of assets etc. There may be many more expenditures <g class=\"gr_ gr_221 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"221\" data-gr-id=\"221\">of<\/g> emergency nature. So, a company has to keep aside a long-term provision to meet such expenses.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Short-Term Borrowings<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">It reveals a company\u2019s debt in banks or any financial institutions. This debt has to be paid off within a short term of period. Short-term borrowings may be loans or commercial papers. If a company has high debt that needs to be covered up in a short-term, it indicates the respective company\u2019s weak fundamentals.<strong>\u00a0<\/strong><\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Trade payables<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">A company buys something on credit and it becomes subject to pay the bills later. This payment to be made is called Trade payables. Actually, <g class=\"gr_ gr_232 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling multiReplace\" id=\"232\" data-gr-id=\"232\">everyone<\/g> be it a company or something else has a tendency to delay the payments of bills as much as possible. A company always attempts to meet the expenses at hand like productive purposes. A company must be capable of paying back the trade payables at the <g class=\"gr_ gr_197 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling ins-del\" id=\"197\" data-gr-id=\"197\">raise<\/g> of demand, though greater payables may be a good sign.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Current Liabilities<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">A company\u2019s Current liabilities include short-term borrowings, trade payables, short-term provisions etc. An investor should be sure that the company has an adequate fund to pay off its liabilities. To check this, one method is to see the current ratio of the company. The current ratio is calculated on dividing current assets by current liabilities. If the result or the current ratio of a company becomes one or more, it indicates that the company owns sufficient short-term resources to pay off its all short-term liabilities.<\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>Short-term provisions<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Short-term provisions <g class=\"gr_ gr_577 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"577\" data-gr-id=\"577\">means<\/g> the fund reserved for the expenditures like doubtful debt, provision for tax, a discount to debtors etc. These expenditures are to be met within a financial year.<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\">Read also:\u00a0<span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\"><span style=\"color: #ff0000;\">\u00a0<a href=\"http:\/\/capitalante.com\/top-10-best-sectors-to-invest-in-india-for-long-term\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\">Top 10 Best sectors to invest in India for long-term<\/a><\/span><\/span><\/span><\/span><\/span><\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\"><span style=\"color: #000000;\">Read also:<\/span><span style=\"color: #ff0000;\">\u00a0<span style=\"color: #000000;\"><span style=\"color: #ff0000;\">\u00a0<a href=\"http:\/\/capitalante.com\/top-10-best-stocks-to-buy-in-india-for-long-term\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\">Top 10 Best stocks to invest in India for long-term<\/a><\/span><\/span><\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">So, the balance sheet will give you a clear picture <g class=\"gr_ gr_251 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"251\" data-gr-id=\"251\">about<\/g> the financial health of a company. If you analyze the balance sheets of different companies of at least 5 years, you can get a clear view about which company is doing better than its peer companies. Then the balance sheet will help you to invest accordingly.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sufficient knowledge of various financial records like balance sheet, profit and loss account, free cash flow etc. help an investor to know the financial condition of a company and then he may decide accordingly. Among all the financial statements\/records the &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"How to Analyse the Balance Sheet of a Company\" class=\"read-more button\" href=\"https:\/\/capitalante.com\/how-to-analyse-the-balance-sheet-of-a-company\/#more-3252\">Continue Reading<span class=\"screen-reader-text\">How to Analyse the Balance Sheet of a Company<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":4061,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[110],"tags":[],"_links":{"self":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/posts\/3252"}],"collection":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/comments?post=3252"}],"version-history":[{"count":0,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/posts\/3252\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/media\/4061"}],"wp:attachment":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/media?parent=3252"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/categories?post=3252"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/tags?post=3252"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}