Read the balance sheet in three points: assets, abilities, and net assets

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The balance sheet is a table to see the company's financial safety.

This article explains the meaning of assets, abilities and net assets and how to use them in investment decisions.

When you look at the balance sheet, press the following three points.

• Property
• Debt
• Net assets

You can see what the company has and what to borrow and how much self-capital is piled up just by looking at these three.

What is the balance sheet?

The balance sheet indicates the company's property status.

In English, it is called “Ba。 Sheet”, and it is written as “B/S”.

In a word,

What the company has and what to borrow and how much money they have

See the materials.

The basic structure is:

If you look at the expression, it looks like this:

Assets = Debt + Net assets

This is the basis of financial analysis.

What is an asset?

Assets are property owned by the Company.

Here are some examples:

A company with high assets looks strong at first g。.

However, the contents of the assets are important.

There is a lot of cash, a lot of stocks that are hard to sell, or a lot of receivables that can be recovered, and the meaning changes greatly.

What is debt?

Debt is the money and payment obligations that need to be paid in the future.

Here are some examples:

Debt is not always bad.

Because it can be used for growth investment, it will lead to growth.

However, if the debt is too large, it will weaken interest rate rise and economic deterioration.

Important

Is it possible to return from the size of the borrower?

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What is Net Asset?

Net assets are the company's own capital.

Indicates financial stability because there is no repayment obligation.

A company with thick net assets tends to be more likely to withstand scenic and temporary deficits.

On the other hand, companies with low net assets are more likely to be borrowed.

The following three points are available:

• Are Net Assets Increased?
• Is there too much debt?
• Is the profit gained?

Companies with net assets annually may have gained interest internally.

The first thing to see is net assets

When reading the balance sheet, it is easy for beginners to see the net asset.

Net assets are the financial strength of the company.

For example:

However, it is not a good company because there are many net assets.

It is necessary to check the capital efficiently.

Debt is not bad

Debt is the money you need to pay in the future.

Includes borrowings, corporate bonds, and accounts.

Debt is not always bad.

For example, if a company borrows for plant construction, M&A, and new business, and leads to subsequent profit growth, debt acts as growth funds.

However, there is also a note.

It is important to see the balance between money and cash when viewing debt.

What is the capital ratio?

The ity ratio is the percentage of net assets occupied by assets.

ity ratio = ity ÷ Total assets × 100

In general, the higher the ity ratio, the lower the borrowing dependency, and the more the financial stability.

However, there is a difference in the industry.

Banks, real estates, railways, communications, etc. are more likely to become a debt due to the nature of the business.

Therefore, the ity ratio is assumed to be compared within the same industry.

How to invest

In investment, we use the balance sheet for safety check.

Specifically, you can check the following items:

• Is cash enough?
• Is borrowing too much?
• Is Net Assets Long-Term?
• Is the ity ratio very low?
• Are stocks and receivables in ?

Please note that even companies with a short-term stock price, if the balance sheet is weak.

On the other hand, companies with strong financial value may be prolonged and stable.

Common misunderstandings

We cannot determine whether a company is good or not with a balance sheet.

It is also necessary to show profit and loss statements and cash flow statements indicating the flow of cash.

Here are some common failures:

• Determine cash only
• Avoid borrowings
• I re industry differences
• Determine only one year
• Don't see the contents of assets

It is important to see the changes of the past few years.

3 years to see changes

The balance sheet is easier to understand by a few years rather than just one year.

Here are the changes you want to check:

In financial analysis, trend is more important than a year number.

Balance Sheets View Corporate Financial Strengths

• Assets that are owned by the Company
• Debt is the money you need to make
• Self-capital that does not return net assets
• Asset = Debt + Debt
• Investing compares the same business for several years

Let’s take a look at the balance sheet for three years.

In particular

1. Cash
2. Payment
3. Net assets

By confirming these three changes, the financial strength of the company becomes visible.

Concept

The balance sheet is a tool to see the company's financial strength.

Text

• Main:Read 3 balance sheet
• Sub: View assets, abilities, and net assets

Color

• Navy White
• Green

構成

• Left: 3 blocks of assets, abilities, and net assets
• Central:Financial strength check
• Right: Upward graph showing safety