Understanding Balance Sheets

Mastering the Balance Sheet for the CFA Level 1 Exam

Welcome to our easy-to-understand, fun-filled guide on balance sheets! We’ll cover the essentials and show you how to make sense of these important financial statements. Are you ready to become a balance sheet aficionado? Let’s jump in!

PRE: Components and Format of the Balance Sheet

Prepare for a thrilling adventure into the world of balance sheets! Discover the three key components: assets, liabilities, and owner’s equity, and learn how to classify them based on expected timeframes. Together, we’ll delve into liquidity, solvency, and working capital analysis.

►Dive into the balance sheet realm here.

PRE: Current Assets

Journey through the land of current assets, uncovering the mysteries behind cash and cash equivalents, marketable securities, accounts receivable, and inventories. As you venture forth, you’ll encounter other current assets, such as the curious case of prepaid expenses.

►Set sail on your current assets odyssey here.

PRE: Current Liabilities

Unravel the world of current liabilities, where you’ll learn about accounts payable, notes payable, accrued liabilities, and unearned revenue. As you delve into this captivating subject, you’ll discover how these obligations impact a firm’s financial position.

►Unlock the secrets of current liabilities here.

Non-current Assets

Embark on an adventure through non-current assets, exploring the landscape of tangible and intangible assets, as well as financial assets. Traverse the world of PP&E, investment property, and intangible assets like patents, trademarks, and goodwill, uncovering their impact on balance sheets.

►Journey into the realm of non-current assets here.

Non-Current Liabilities

Dive into the deep end of non-current liabilities, exploring long-term financial liabilities and deferred tax liabilities. Learn how notes payable, bonds payable, and derivative liabilities are reported, and discover the fascinating world of deferred tax liabilities and their origin.

►Plunge into the realm of non-current liabilities here.

PRE: Owners’ Equity

Embark on the final leg of the balance sheet odyssey, exploring the wonders of owners’ equity. Discover the intricacies of contributed capital, treasury stock, preferred stock, retained earnings, accumulated other comprehensive income, and non-controlling interest. Witness how these elements intertwine in the statement of changes in stockholders’ equity.

►Unravel the enigma of owners’ equity here.

Analysis of Balance Sheets

Master the art of balance sheet analysis with a deep dive into liquidity and solvency ratios. Decode common-size analysis to unveil trends, strategies, and comparisons, making you a balance sheet guru in no time.

►Analyze balance sheets like a pro here.