How Do You Read A Balance Sheet?
• Learn what assets are. Assets are valuable resources that a firm owns or controls. The simplified balance sheet shown in the example below includes four assets. • Cash obviously has value. • Accounts receivable are amounts owed to Newton Company by its customers; these have value because they represent future cash inflows. • Inventory is merchandise acquired that is to be sold to customers. Newton expects its inventory to be converted into accounts receivable and ultimately into cash. • Property plant and equipments (perhaps delivery vehicles or showroom furniture) enables Newton to operate its business. • Goodwill is the amount of money a company paid in excess of tangible book value for its acquisitions. This is understandably called goodwill because it represents good feelings that a company is worth more than its tangible assets. • Intangible assets, which include brands, trademarks, patents, are assets that cannot be touched. These cannot be readily valued and therefore are assi
