A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure. It is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders. The balance sheet is used alongside other important financial statements such as the income statement and statement of cash flows in conducting fundamental analysis or calculating financial ratios. The balance sheet adheres to the following accounting equation, where assets on one side, and liabilities plus shareholders' equity on the other, balance out:.
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Supply Chain – Finance Connection: A Supply Chain Improvement Case Study
Off-balance sheet OBSF financing is an accounting practice whereby companies record certain assets or liabilities in a way that prevents them from appearing on the balance sheet. Companies sometimes take a creative approach when making big purchases. Those with mountains of debt will often do whatever it takes to ensure that their leverage ratios do not lead their agreements with lenders, otherwise known as covenants, to be breached. They will also be mindful that a healthier looking balance sheet is likely to attract more investors and that banks tend to charge highly leveraged firms more to borrow money as they are considered more likely to default.
Leases that can be excluded from the balance sheet under the new standards. Impact to finance vs. The financial obligations that result from OBSF are known as off-balance-sheet liabilities. In many cases, off-balance-sheet liabilities are simply recorded as operating expenses.