1. Money

Assets, Liabilities & Shareholder Equity on the Balance Sheet

Investing Lesson 3 - Analyzing a Balance Sheet


Assets Liabilities and Shareholder Equity

The three parts of each balance sheet let you understand a company's capitalization structure - that is, how much of the money at work in the company comes from shareholders' money, debt, vendors, or other sources.

The Three Parts of the Balance Sheet

Every balance sheet is divided into three main parts - assets, liabilities, and shareholder equity.

  • Assets are anything that have value. Your house, car, checking account, and the antique china set your grandma gave you are all assets. Companies figure up the dollar value of everything they own and put it under the asset side of the balance sheet.

  • Liabilities are the opposite of assets. They are anything that costs a company money. Liabilities include monthly rent payments, utility bills, the mortgage on the building, corporate credit card debt, and any bonds the company has issued.

  • Shareholder equity is the difference between assets and liability; it tells you the "book value", or what is left for the stockholders after all the debt has been paid.

Every balance sheet must "balance". The total value of all assets must be equal to the combined value of the all liabilities and shareholder equity (i.e., if a lemonade stand had $10 in assets and $3 in liabilities, the shareholder equity would be $7. The assets are $10, the liabilities + shareholder equity = $10 [$3 + $7]).

What Does a Balance Sheet Look Like?

Below is an example of what a typical balance sheet looks like. I've taken it from an old Coca-Cola annual report and, for the sake of space, removed lines that had a $0 value. Don't worry, though, we will still discuss each line you are likely to encounter when reading a balance sheet, whether for small business or a large publicly traded corporation.

Next page > Current Assets on the Balance Sheet > Page 1, 2, 3, 4, 5, 6, 7, more >>

This page is part of Investing Lesson 3 - Understanding the Balance Sheet. To go back to the beginning, see the Table of Contents. If you have already read this lesson, you can skip directly to the Balance Sheet Quiz.

Sample Coca-Cola Balance Sheet

Coca-Cola Company
Consolidated Balance Sheet - January 31, 2001
Current Assets Dec. 31, 2001 Dec. 31, 1999
Cash & Equivalents $1,819,000,000 $1,611,000,000
Short Term Investments $73,000,000 $201,000,000
Receivables $1,757,000,000 $1,798,000,000
Inventories $1,066,000,000 $1,076,000,000
Pre-Paid Expenses $1,905,000,000 $1,794,000,000
Total Current Assets $6,620,000,000 $6,480,000,000
Long Term Assets $8,129,000,000 $8,916,000,000
Property, Plant, & Equipment $4,168,000,000 $4,267,000,000
Goodwill $1,917,000,000 $1,960,000,000
Total Assets $20,834,000,000 21,623,000,000
Current Liabilities
Accounts Payable $9,300,000,000 $4,483,000,000
Short Term Debt $21,000,000 $5,373,000,000
Total Current Liabilities $9,321,000,000 $9,856,000,000
Long-Term Liabilities
Long-Term Debt $835,000,000 $854,000,000
Other Liabilities $1,004,000,000 $902,000,000
Deferred Long Term Liability Charges $358,000,000 $498,000,000
Total Liabilities $11,518,000,000 $12,110,000,000
Shareholders' Equity
Common Stock $870,000,000 $867,000,000
Retained Earnings $21,265,000,000 $20,773,000,000
Treasury Stock ($13,293,000,000) ($13,160,000,000)
Capital Surplus $3,196,000,000 $2,584,000,000
Other Stockholder Equity ($2,722,000,000) ($1,551,000,000)
Total Stockholder Equity $9,316,000,000 $9,513,000,000

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