Introduction to the balance sheet

Analyzing Financial Statements in Python

Rohan Chatterjee

Risk Modeler

What we'll achieve

At the end of this course, we'll be able to:

Read financial statements
Define, compute, and interpret financial ratios
Write reusable and general functions in Python that will reduce repetitive tasks
Deal with missing data in financial statements
Visualize financial ratios using Seaborn

The balance sheet

A snapshot at a point in time of a company's
- Assets
- Liabilities
- Shareholders' equity

The balance sheet

$Assets = Liabilities + \textit{Shareholders' equity}$
A balance sheet has three main sections:
- Assets
- Liabilities
- Shareholders' equity

Assets

Can be broken down into
- Current assets: benefits usually reaped within one year
- Non-current assets: benefits reaped over the long run

A picture of the asset side of the balance sheet. Shows the current assets which include accounts receivable and inventory; and con-current assets which include long-term investments, property, plant, and equipment.

Liabilities

Liabilities can be broken into:
- Current liabilities: usually to be repaid within one year
- Non-current liabilities: can be paid off after one year

A picture showing the liabilities side of the balance sheet. Shows the current liabilities which include accounts payable and short-term loans; and non-current liabilities which include long-term loans.

Shareholders' equity

A picture showing the shareholders' equity part of the balance sheet. Only includes the entry - shareholders' equity.

A picture showing an entire balance sheet. The entries in the assets, liabilities, and shareholders' equity are the same as in the pictures before. This is a picture that combines the three pictures before.

Let's practice!

Analyzing Financial Statements in Python