Introduction: A business balance sheet is essentially a snapshot of the company’s finance at any given point in time. The balance sheet links to other important financial statements like the income statement and statement of cash flows. The balance sheet allows for value determination of the business.
Deliverables: Minimum 2-3-page paper
Step 1: Scenario Reflection and Introduction
Begin the essay with an introduction that describes what a Balance Sheet is, what it tells you, and what investors look for in a Balance Sheet.
Consider the following scenarios A and B:
Scenario A: You are working on your balance sheet for your boss. You are double checking your calculations for the capital and debt. What are the elements you need to think through for this task and what are the calculations you will use?
Scenario B: Your boss has a question about the types of financing on the balance sheet; specifically the equity. He wants to know how you came up with your result. What is the process you are going to tell him?
The Written analysis should include a minimum of one or two references cited within the content of the paper and the reference page according to APA guidelines.
Step 2: Address Scenario A and Scenario B
Scenario A: Elaborate and write about the importance of:
The two types of financing used to finance assets on a balance sheet
Gross working capital and Net working capital
Describe the process that includes all of the steps above to show your boss how the capital and debt ratio illustrates the financial strength (or weakness) of the company
Scenario B: Elaborate and write about the importance of: :
Equity and its sources
How a firm’s common equity is reported on a balance sheet
How the earnings before taxes and net income are calculated for the income statement
How earnings per share and dividends per share are calculated
From the information you have obtained from the steps above describe the process to your boss how the earnings per share and dividends per share are calculated and its importance to the firm
Step 3: Summary and Conclusion
Perform reflective thinking about financing and equity with reasons why it is so important to a company’s sustainability short and long term. Synthesize what you have learned from this essay assignment and share your thoughts.