before the company receives the borrowed funds in any form, whether it is a loan from a financial institution or a private individual investment, its financial position is subjected to scrutiny in order to determine whether it is able to cope on time with their obligations.Virtually all the information that is needed to make the first conclusions can be obtained by analyzing the balance sheet liability.But first you need to define it.
passive balance - is the total amount of sources of funds, which are presented in the balance sheet.Liabilities in the world has two main interpretations that conventionally referred to as the legal and economic.Passive balance in the first case is treated as a set of obligations of the enterprise with respect to the persons who directly or indirectly provide him with its own funds (the share of the owners in this case is treated as a liability in the conventional sense).In the second case, the liability is treated as a collection of sources of funds.In addition, a liability is called the distribution plan valuation of assets.
Thus, in passive balance reflects an entity's decision on the choice of sources of external and internal financing of investment decisions that result in the acquired company assets.In accordance with this approach, there were formed three main sections liability balance.
The first section, called "equity" contained information concerning the funds that were invested in the company by its shareholders.This can take the form of investments in the statutory fund of the company during the creation, redemption of certain shares after the establishment of the company, as well as through retained earnings.Quite often, profits derived by an enterprise are not fully distributed to the shareholders in the form of dividends and deferred for the expansion of the company - it is also considered a source of funding.A large proportion of equity is a good "safety cushion" for the company from possible financial risks.
In the second part of its liability balance provides information on long-term commitment that the company has to external parties.Such lenders are not interested in the economic success of the enterprise, because they provide money in the debt, which should be given regardless of whether the company's profits.However, before you get a long-term loan, in the form of redemption, lease, loan, etc., the company must prove that it will be able to return it on time and to agreed-upon percentage of the contract.The more the company has long-term debt, the less chance of getting a new loan.
Finally, the third section - a short-term obligations, ie obligations which must be repaid within a year now.Basically, it refers to commercial loans and those liabilities that are due for payment in the current year.An analysis of the balance sheet liability in this case should be carried out in parallel with the analysis of its assets, as it is important to determine whether the enterprise by using the assets to pay its debts.For this purpose calculated liquidity.If these indicators are at a level lower than the recommended level of financial analysts, the company can experience serious problems with financing.
So versatile balance contains all the information needed to analyze the financial situation of the company and its financial prospects, so for an experienced financier only one look at him is enough to read the company as an open book.
