A video tutorial designed to teach investors everything they need to know about total assets on the balance sheet. Visit our free website at http://www.PerfectStockAlert.com
This video shows how to calculate a company's Return on Assets (ROA). It provides an example to show how ROA can be used to compare firms' performance. ROA is calculated by dividing a company's Net Income by its Average Total Assets. You can compute the Average Total Assets by adding the company's total assets from its most recent Balance Sheet date to its total assets from the previous year's Balance Sheet date and dividing the sum by two. You use the Average Total Assets because you want to approximate the amount of assets the company had during the year (or quarter, month, etc.) during which the company generated the Net Income. Examining ROA is important, because it measures how profitable a company is after taking into consideration its assets. To show why this matters, think about the following example: let's say two entrepreneurs earned a profit of $1,000 in their first year of business. They might seem equally successfully because they earned the same profit, but what if one of the entrepreneurs began with just $50 in assets whereas the other entrepreneur started out with $10,000,000 in assets? They both earned the same profit, but one of the entrepreneurs did more with less. Thus, ROA measures how efficient a company was at generating profit from its assets. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like Edspira on Facebook, visit https://www.facebook.com/Edspira To sign up for the newsletter, visit http://Edspira.com/register-for-newsletter Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin To follow Michael on Facebook, visit https://www.facebook.com/Prof.Michael.McLaughlin
Brought to you by StratPad: Simple Business Plan App. Try it free at http://www.stratpad.com In this video, we'll dig deeper into the balance sheet and explore the assets section. You'll learn about the differences between current and long-term assets and how to calculate total assets. http://www.stratpad.com/financial-statements-made-easy-video-course/balance-sheet-current-assets-long-term-assets-total-assets/ Video Transcript So let's take a look at the assets section of the balance sheet. The assets section is commonly divided into two pieces: Current assets Long-term assets. Current assets are assets that can be turned into cash within a year — in a short period of time — and they include cash, of course, accounts receivable (also called AR: this is the amount of money that your customers owe you) and then inventory. Long-term assets include things like building and machinery. Alright, so let's put some numbers in so you can see how the assets section totals. Let's say that we have a total of $1,000 in cash. Our customers owe us a total of $5,000 and we've got $10,000 worth of inventory sitting on our shelves. We would then, for current assets, subtotal this ($1,000 plus $5,000 plus $10,000 is equal to $16,000 worth of current assets). Our building is worth $150,000 and I've got machinery in there worth another $25,000. I'm going to subtotal my long-term assets ($175,000). And then I'm going to subtotal and create my total assets ($191,000) and I got there by simply adding my $16,000 in current assets to my $175,000 in long-term assets. And then, of course, now I'm at the bottom of my financial statement and so I do a double-underline. My assets are $191,000. Next up — we'll do the liabilities and owner's equity.
How to calculate Return On Assets or ROA? I will take you through two examples of calculating ROA, and then show you what the next steps in your financial analysis can be. ROA or Return On Assets is defined as Net Income divided by Assets. You find the Net Income number on the income statement or P&L, and the assets number on the balance sheet. Let’s perform the ROA calculation for two well-known American companies from very different industries: telecom company Verizon (NYSE: VZ), and retail company Walmart (NYSE: WMT). Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
This video is helpful for economics, commerce and management students
Through a case study, this video explains the method, as to how to calculate capital requirement for a asset portfolio of a bank. Very useful for CAIIB exam and JAIIB exam
Following on from his "3 ways to value a company" video, Tim introduces the first method called the 'net assets approach'. Along the way he explains how it works, how it helps investors, and also points out some of its pitfalls.
http://www.accounting101.org/accounting-equation/ Every transaction that happens within a business has an effect on its financial position. The accounting equation is what keeps all of the transactions in balance and helps users of the information make sense of what areas each transaction affects. The financial position of any company is based on the following items: Assets: what the company owns Liabilities: what the company owes to other parties Owners' Equity: the difference between assets and liabilities The Accounting Equation The basic accounting equation simplifies our understanding of how these three areas of the company relate to each other. The basic accounting equation for any given business is: Assets = Liabilities + Owners' Equity Assets are the things that the company owns, or its resources. Assets are things like cash, accounts receivable, inventory, prepaid insurance, buildings & equipment, land, and goodwill. Remember that total assets will always equal liabilities + owners' equity. That's exactly what a balance sheet means... because the assets, or the left side of the balance sheet, will always equal liabilities + owners' equity, or the right side of the balance sheet. Liabilities are the company's obligations, or the amounts that the company still has to repay to other parties. Liabilities can be notes payable, accounts payable, wages payable, interest payable, bonds payable, or income taxes payable. Liabilities can be viewed as bills that the company has to pay, or as the part of the source of acquiring their assets. For example, if the company bought a new delivery truck for $20,000 using a $20,000 loan from the bank, then the company has an asset of $20,000, as well as a liability of $20,000 to pay back to the bank. Notice that the asset equals the liability in this example. Owners' equity is the amounts invested by the owners of the company plus the cumulative net income that hasn't been taken out or distributed as dividends to the owners of the company. Difference Between the Balance Sheet and the Income Statement As we already mentioned, the balance sheet is called the balance sheet because the accounting equation will always balance... meaning the assets side of the balance sheet will always equal the same as the liabilities + owners' equity. There is also a big difference in the format of the balance sheet versus the income statement. The balance sheet gives a company's financial position at any given point in time, where as the income statement is a report of activities over a given time period.
A video tutorial by PerfectStockAlert.com designed to teach investors everything they need to know about Current Assets on the Balance Sheet. Visit our free website at http://www.PerfectStockAlert.com