BALANCE SHEET of a firm's financial position at a specifie point in time. It The balance sheet is a snapshot firm's f is a convenient means of organizing and suma owes (its liabilities), and whatever residual ving what a (its stockholders' equity). The left-hand side of le Temains belo owns Gts assen time. t hand side counterpart. That is, the value of sum of its liabilities and stockholders' equity value is the value of the firm's assets (left-hand side) is equal to the (the right-hand side). Equity the balance sheet must o the equal its Assets -Liabilities + can be classified into three categories: The firm's assets to be converted to cash in less than a accounts receivable, inventories, and Current assets which are assets that are be 1. markctable securities ed year, such as cash, es, prepaid expenses. 2. Fixed assets or plant, property and equipment (PP&E which are tangible assets that on the book for periods exceeding one year. There is also a are expected to remain contra account named accumulated depreciation. 3. Intangible assets such as goodwill, patent, trademark, etc. ng-term: The firm's liabilities can be classified as either current or lo 1. Current liabilities, like current assets, have a life of less than one year and they must Long-term debt is a debt that is not due in the coming year, such as mortgage bond. stock (the par value), common stock (the par value), additional paid-in capital (in excess be repaid within the year, such as accounts payable, hotes payable, unearned revenues other payables, current portion of the long-term debt, etc. 2. The stockholders' equity represents the owners' claim on the firm. It includes of par), and retained carnings. preferred In order to directly compare the balance sheets of two companies that differ in size, standardized financial statements, or common-size statement, must be prepared first. To construct a common-size balance sheet, we express each item as a percentage of total assets