More of this Feature • Lesson 3 Main • How to Get Copies • What is it? • Typical Balance Sheet • Current Assets • Receivables • Receivable Turns • Inventory • Inventory Turns • Inventory Example • Prepaid Expenses • Current Liabilities • Working Capital • WC Per Dollar of Sales • Negative Work. Cap • Current Ratio • Quick Ratio • Long Term Investment • Property, Plant, Equip. • Intangible Assets • Goodwill • Deferred Charges • Debt, Debt to Equity • Other Liabilities • Minority Interest • Shareholder Equity • Book Value • Com. & Pref. Shares • Cap. Surplus, Reserve • Treasury Stock • Retained Earnings • Formula & Calculations • Putting it all Together • Segment 2

Related Resources • Investing Lesson 1 • Investing Lesson 2 • Investing Lesson 3 • More Lessons

Formulas & Calculations for the Balance Sheet

You've learned how to analyze a balance sheet!  In Segment 2 we are going to work through the balance sheets of a few American companies.  Here is a reference guide for all of the calculations you've learned so far.  You should memorize these as soon as possible; they are priceless investment tools for the rest of your life.

Tests of a Company's Financial Strength and Liquidity:

Working Capital: Current Assets - Current Liabilities
Working Capital per Dollar of Sales: Working Capital ÷ Total Sales¹
Current Ratio: Current Assets ÷ Current Liabilities
Quick / Acid Test / Current Ratio: Current Assets minus inventory (called "Quick Assets) ÷ Current Liabilities
Debt to Equity Ratio: Total Liabilities ÷ Shareholders' Equity

Tests of a Company's Efficiency:

Receivable Turnover: Net Credit Sales¹ ÷ Average Net Receivables for the Period
Average Age of Receivables: Numbers of days in period ÷ Receivable Turnover
Inventory Turnover: Cost of Goods Sold¹ ÷ Average Inventory for the Period
Number of Days for Inventory to Turn: Number of days in Period ÷ Inventory Turnover

¹These can be found on the income statement, not the balance sheet.

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