Analyzing Balance Sheet

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by a searcher from Indian Institute of Technology, Delhi
in Atlanta, GA, USA

2yrs ago

Analyzing Balance Sheet

Hi All,
I was recently analyzing balance sheets of a business and saw some interesting numbers (rounded up):
1. Cash in bank account: $20k
2. Total A/R: $1M
3. Total assets: $800k
4. Total liabilities: $4M (50% is outstanding debt)
5. Total Equity: -$3.5M (significant draws from the owners)
6. Total liabilities and equity: $850k

The sellers want to pay out the debt using proceeds from the sale. Curious to hear what folks feel about the health of the business and how the owners have been running it.

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reply by a searcher 2yrs ago
in Boston, MA, USA

Cash, AR, AP, Inventory are the only real parts of 99.9% of businesses historical BS that matter. (Bec you need to know working cap needs.) Dont waste time looking at a BS, Who cares if the seller took at $1M, $10M or $100M in debt on the business if its going to be transferred deb free.

Also the BS is usually the last thing that a small business owner worries about. Inventory FMV rarely matches BS, Equipment FMV wont match, AR: seldom has bad debt written off, loans are only updated once a year. Dont get caught up in bad data, buying a small business is sloppy

reply by an intermediary 2yrs ago
from The University of Chicago in Chicago, IL, USA

We all have POV. Your perspective is diametrically opposite to mine. Balance Sheet can be, and is, used by private and public companies to hide/unhide real profits. Analysis of multiple years of Balance Sheet helps understand QoB (Quality of Business), not just QoE.