Understanding the risks behind the major items on the balance sheet requires a focus on the following aspects:
1.Current Assets and Current Liabilities: Focus on the ratio of current assets to current liabilities, as well as the current ratio. The current ratio is calculated by dividing current assets by current liabilities, which reflects the short-term solvency of a business. If the current ratio is low, it indicates that the short-term solvency of the company may be at risk.
2.Long-term assets and long-term liabilities: Focus on the ratio of long-term assets to long-term liabilities, as well as the asset-liability ratio. The debt-to-asset ratio is calculated by dividing total liabilities by total assets, and it reflects the long-term solvency of a business. If the debt-to-asset ratio is high, it indicates that the company's long-term solvency may be at risk.
3.Inventory: Inventory is an important item in the balance sheet, which reflects the value of the goods in inventory of a business. If there is too much inventory, it may lead to capital tie-up and the risk of falling prices. Therefore, it is necessary to pay attention to the quantity and value of inventory, as well as indicators such as inventory turnover.
4.Accounts receivable: Accounts receivable is an important item in the balance sheet, which reflects the quality of a company's sales revenue. If there are too many receivables, it can lead to the risk of bad debts. Therefore, it is necessary to pay attention to indicators such as the volume and age of accounts receivable, as well as the turnover rate of accounts receivable.
5.Fixed assets: Fixed assets are an important item in the balance sheet, which reflects the production capacity and technical level of the enterprise. If there are too many fixed assets, it may lead to technology obsolescence and impairment risks. Therefore, it is necessary to pay attention to the quantity and value of fixed assets, as well as indicators such as the turnover rate of fixed assets.
6.Intangible assets: Intangible assets are an important item in the balance sheet that reflects a business's intellectual property and brand value. If there are too many intangible assets, you may need to pay attention to their valuation and the risk of legal disputes.
In summary, understanding the risks behind the key items on the balance sheet requires a number of concerns, including the ratio of current assets to current liabilities, the ratio of long-term assets to long-term liabilities, inventories, accounts receivable, fixed assets and intangible assets. At the same time, it is also necessary to analyze and judge the operation of the enterprise and the characteristics of the industry.
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