To assess the financial situation of a company we must focus on the analysis of its balance sheet. This is usually the first step of financial analysis in the valuation process, being the only step in some very specific cases that we have already seen. In this article we will see the structure of the balance sheet, its main characteristics and some examples of balance sheets of listed companies.
Characteristics of the balance sheet structure
The structure of the balance sheet is regulated in the materiality accounting principle, companies may dispense with some accounts or explain them in less detail when they are of little importance in the company. This principle also helps to facilitate the work of investors.
Structure of the balance sheet: assets and liabilities
The balance sheet is divided into assets and liabilities.
The “assets, rights and other resources economically controlled by the company, resulting from past events from which it is expected to obtain benefits or economic returns in the future”.
The “current obligations arising as a result of past events, for which the company hopes to dispose of resources that may produce benefits or economic returns in the future”.
Assets are divided into non-current assets (previously called fixed assets) and current assets (previously called current). The structure of the asset is as follows:
A) Non-current assets
Includes intangible assets, property, plant and equipment, real estate investments and long-term financial investments, among others.
B) Current asset
Includes inventories, trade debtors and other accounts receivable, short-term financial investments and cash and other equivalent liquid assets, among others.
Liabilities are divided into equity, current liabilities (previously called current liabilities) and non-current liabilities (previously called fixed liabilities). The structure of the liability is as follows:
A) Net worth
It includes the contributions made by the partners or owners of the company, which are not considered liabilities, as well as accumulated results or other variations that affect them.
B) Non-current liabilities
They are the debts of the company whose payment period is greater than 1 year.
C) Current liabilities
They are the debts of the company whose payment period is less than 1 year.
Balance sheet examples
To familiarize ourselves with the balance sheet, it is best to put your hands in the dough and start looking at balance sheets of listed companies. So that you don't have to look for them yourself, here is a small selection of balance sheets for Spanish companies, which, as you can see, all share the same structure. Here they are: