- Balance sheet items
The balance sheet is a snapshot of a company's -- assets(what
it owns), liabilities (what it owes),
owners' equity (net worth - what is
left over for the owners). (More
3.2.2 - Balance sheet analysis
Balance sheets are a snapshot of company well-being.
You can learn a lot by looking at the notes
that accountants include with the balance sheet, to
give context like scribblings on the back of a photograph.
You should also focus on changes between balance sheets
over time, to give a sense of direction and motion like
a series of images in time-lapse photography. Finally,
you can see more by analyzing the ratios
of various items in the balance sheet, to measure business
well-being like a comparison of colors or shadow in
a photograph to decide whether the sun is rising or
setting. (More 3.2.2>>)
3.2.3 - Accumulated retained earnings
The balance sheet is a static view of the financial
sistuaion of the business. It changes from period to
period as the business makes or loses money.
Retained earnings is an accountant's term used to refer
to earnings retained by the business and not distributed
to shareholders as dividends. (Lawyers call this earned
surplus.) Earnings kept in the business are accumulated
from accounting period to accounting period. (More
From Robert W. Hamilton, Fundamentals of Modern
Business 204-08 (1989).