how to prepare comparative balance sheet
Answers
Answer:
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Explanation:
The first step to complete a comparative balance sheet analysis is to get organized. Locate the company's balance sheet data and arrange it in a table such that each account is shown side by side over time.Make sure the data is in regular time intervals for consistency. In its most basic form, this could be as simple as two quarterly snapshots, side by side. In other cases, it may be more informative to compare more snapshots over time. A farming company with distinct seasonal activities, for example, may require that you review 12 consecutive monthly balance sheets in order to understand how its seasonality impacts the balance sheet's inventory, accounts receivable, and accounts payable.
Next, compare how each account has changed over time. Did cash go up, down, or remain constant? What about inventory, accounts receivable, or accounts payable? Continue working down the balance sheet, noting how the different accounts interact and change together over time. For example, if the company shows an increase in real estate assets, do you see a corresponding increase in debt or equity capital? Can you formulate an educated guess as to how the company was likely to have funded the real estate purchase?
Answer:
The first step to complete a comparative balance sheet analysis is to get organized. Locate the company's balance sheet data and arrange it in a table such that each account is shown side by side over time. Make sure the data is in regular time intervals for consistency.