Marketing Case

How can the use of the balance sheet be applied to my everyday life?

When observing my everyday life, I think of a balance sheet. Where am I at this point in time? A balance sheet is like a snapshot of my financial condition at a specific moment in time. A balance sheet is a financial statement that reports the assets, liabilities, and owner's equity at a specific date. When I began searching for a home, I had to provide my mortgage with a balance sheet per say of all my assets and liabilities. You can learn so much about a person or even company from the balance sheet. When I prepared my balance sheet, it gave me a better perspective on how I invested my money. At the time when I purchased my home, my balance sheet was what I considered superb. I had a nice savings account, a vehicle that was paid for, substantial large amount of money in my 401K account, along with a few other items that could easily be converted to cash. I didn't have many liabilities so my equity was very high. I've come to find out that lenders would like to see you have some outstanding liabilities and see you making timely payments on those liabilities over a period of time. This shows the lender that you are reliable at making payments. By preparing my balance sheet and researching more online and talking with experts, I decided to increase my liabilities to show that I am financially stable enough to take care of these liabilities. In short, by preparing my balance sheet, I am able to have a better understanding of all the categories that make up the balance sheet and how it affects a lender's decision to lend.

How can a business manager benefit from an understanding of the balance sheet statement?

It is very important for a manager to understand all financial statements, but most importantly the balance sheet. The balance sheet details so much pertinent information that a manager should be knowledgeable of. The balance sheet tells a business owner what your business owns, what it owes, and what is left over and it tells you this all at cost, not at fair market value. The first section of the balance sheet details things that your business owns known as your company's assets. The asset section is broken down further into categories such as current, fixed and other. The manager should be knowledgeable of the different types of assets and how to identify them. The next section of the balance sheet covers things that you owe known as your liabilities. Liabilities are also broken down into current and long term. This is also helpful in determining if you have sufficient current assets to cover current liabilities due. This is important to lenders and investor's looking to invest in your company. The last section is the equity section. Equity is simply what is left over from the things you own minus the things you owe. From a business manager's