Liabilities Assets Ratio
In addition to financial statements, a balance sheet is also a very valuable financial report, which can provide a very quick, bottom-line snap-shot of the financial stability of a company, individual or family. A balance sheet typically will include everything that is considered to be property, or current assets, which contribute to wealth building. These types of total assets include such things as stocks and bonds, equity in real estate holdings, cash on hand and other liquid assets, reliable cash flows, tools and equipment, and also intellectual property.
On the liabilities side of the balance sheet are found all forms of debts and obligations that are owed by the entity or person. In addition, when calculating the liabilities assets ratio, some people also include in the liabilities column other things such as taxes, professional fees, contractual obligations, and any other arrangement that involves current assets being transferred to another party.
A simple example of formulating the ratio between liabilities and assets can be seen in looking at an individual’s particular situation. For someone who owns their own home, the picture of their current assets would include the fair market value of their home, deposits in all checking and savings accounts, the portfolio of all shares, stocks and bonds, investments in gold, silver, other coins, stamps, artwork, fine jewelry, and similar items of value that typically appreciate over time. In addition, total assets could also include retirement funds and expected pension rights, and any type of promissory note from which they are receiving regular payments.
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