Analysis of the Composition of the Balance Sheet
While the basic financial statements – balance sheet, income statement, and cash flow statement - will provide you with valuable information, there are a number of other types of comparisons and analysis you can perform that can give you insights into how you can better manage your business and improve your profitability.
The balance sheet can be broken down into groups of accounts. A comparative analysis of the percentage relationships of the different groups of accounts that make up assets, liabilities, and equity can serve to detect, control, and manage trends or shifts in the composition of your net business resources.
The asset side of the balance sheet can be broken down into:
Cash and cash equivalents, such as deposits and liquid marketable securities,
Realizable assets, including short-term investments, trade accounts receivable from customers or clients, and other receivables,
Inventories, and
Fixed assets.
The liabilities and equity side can be separated into:
Short-term liabilities (payable within one year),
Long-term debt (payable beyond one year), and
Owner’s equity.
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