This is Mo’ money at napkin finance, right now we’re gonna talk about a company’s balance sheet.
And the balance sheet is exactly what it sounds, just like peanut butter is peanuts with butter in Snapchat, balance sheet. So balance sheet is not intimidating, it is a snapshot, it is a picture of a company at a given point in time.
So let’s say it’s January first and I am the under armor company, I’ve got on my left hand side of my balance sheet which is actually, take a piece of paper and you can just put in the middle, put a little perforation through it and on the left-hand side, we’ve got the assets, on the right-hand side we’ve got the liabilities and the equity. On the asset side, we’ve got cash from all the apparel we’ve sold, we’ve got inventory for all the products, cleats, balls anything an under armor makes that they’ve already produced that’s waiting to be sold is on that asset side because it’s an asset, it is something that they are available, that are available for sale. We’ve got all the offices that we own of Under Armor on the asset side and on the liability side we’ve got the money that we borrowed in order to build those assets up and we’ve got the equity of the money that’s been put in by the company in order to fund the business going forward.
What Does a Balance Sheet Look Like?
So when someone’s like what’s the company’s balance sheet look like, you could say oh well we got a lot of debt on the balance sheet, oh we’ve got a lot of equity in the balance sheet, we’ve got a lot of assets on the balance sheet, but at the end of the day everything balances out and everything is a very simple journal entry in accounting. And all you need to do is make sure you understand how you can manipulate the balance sheet on any given day and that will be a separate topic that mo’ money will talk about. When we talk about cooking the books, we’re really going to be talking about cooking the balance sheet.