25 Need-To-Know Management Ratios

2

The balance sheet

This chapter will divide the balance sheet into five major blocks:

• Fixed assets
• Current assets
• Owners’ funds
• Long-term loans
• Current liabilities

Balance sheet structure

Figure 2.1 shows the balance sheet divided into five major blocks or boxes. These five subsections can accommodate practically all the items that make up the total document. Two of these blocks are on the assets side and three go to make up the liabilities side.

Almost every item that can appear on a balance sheet will fit into one of these boxes. Each box can then be totalled and we now have a balance sheet that consists of five numbers only. These five numbers will tell us much about the company’s structure.

We will continually come back to this five-box ...