Understanding what is active, circulating, current, due, liquid, etc.
A balance sheet is a financial statement that shows the financial position of a company at a specific point in time. This definition, while seemingly simple, requires some clarification.
We refer to equity as the sum of a company's assets, rights, and obligations. In the balance sheet, we list assets and rights in one column called ASSETS, and obligations in another column called LIABILITIES.
Assets are ordered by their propensity to be realized or converted into cash. According to this criterion, the first group includes Non-Current or Fixed Assets, which are those not intended for immediate sale or liquidation because they are needed for the company's operation. These include tangible assets such as machinery, facilities, and buildings, as well as intangible assets such as software, trademarks, etc. Financial rights such as long-term deposits, bonds, and shares in companies are also included.
In a second section, we include Current Assets, which consist of goods such as inventory or receivables such as accounts receivable. These are assets that tend to become liquid in the short term. Cash and cash equivalents.
Similarly, liabilities are ordered by due date, that is, by the period in which we must fulfill the obligations we acquire, and are divided into two blocks, one is Non-Current Liabilities , which includes debts with financial entities and provisions for long -term risks , and the other is Current Liabilities , which includes short-term financial debts (1 year) and what is called spontaneous financing, which are debts with suppliers, creditors and public administrations.
The difference between assets and liabilities is what we call Net Worth and is the value of the company for its partners, always in accordance with the valuations we have made.
The balance sheet or equity is measured by its value represented in monetary units (in our case, euros). To value the different elements that make up the balance sheet, we must use "criteria." Companies use the valuation criteria or principles required by the accounting plan defined by legislation. (Readthe article "How do the changes to the 2017 Spanish General Accounting Plan affect SMEs and micro-enterprises? ")
The Balance refers to a specific moment in time, the moment when we set the thermometer to measure the value; we formulate it obligatorily at the close of the fiscal year, but we also analyze it in other periods (months, quarters, etc.).
Finally, the Balance Sheet can be submitted for review and opinion by an independent expert (auditor), and must be reviewed when the company reaches a certain size, or when required by a certain group of partners, for example.
When we read a balance sheet, we should try to determine if, on the one hand, it includes all the company's assets and liabilities, and on the other hand, if these are valued appropriately. It is common to find "capital gains" or "capital losses ," sometimes due to the valuation method used, and sometimes due to oversights by the person who prepared it.
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A graduate in Economics from the University of Barcelona, he is also a Certified Actuary, Real Estate Agent, and Insurance Broker.
He furthered his training with courses in taxation, business valuation, and credit management offered by the College of Economists of Catalonia and the Center for Financial Studies (CEF).
In 2000, he became the managing partner of the firm, and since 2011, he has also been responsible for the Finance Department.
For five years, while already a member of the management team at Àmbit Assessor, he also held the positions of Deputy General Manager and Finance Director at Alco Grupo Empresarial.
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