How to pick stock (part 7)

Balance Sheet

Balance sheet is the document that access
The current financial situation of the company as well as long term prospect of the company. It tells us the performance of the company long back ago and how is it now.

The basic part here is asset = liabilities + equity

Asset

Asset is the total holdings under the company. In general, asset is a tool who can generate profit to the company. For example, car, buildings, equipment and so on.

There are two kind of assets, one is current asset and another one is fixed asset. Current asset means the asset which can give the benefit to the company within a year while fixed asset refers to the tool that give you benefit more than a year, such as the machine, buildings, equipments and so on.

Liabilities

Liabilities is the obligation of the users to pay the money back to its creditors. The more the liabilities, the more risky the company is, if and only if we compared it with the same category stock if else where equal.

Equity

Equity is the total shareholdings plus / minus retain earnings/loss. It is a good indicator whether the captial can support the revenue or not. Otherwise we would end up rise the capital by verificaion.