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Balance Sheet Info and Working Capital

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How does information from the balance sheet help users of financial information?

What is working capital and how does it relate to the operating cycle?

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Solution Summary

The solution describes information found inside a balance sheet and working capital.

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Information in the balance sheet helps users of financial information by giving the a snapshot of how the company performed during a full accounting cycle (one year). The balance sheet shows the accounting equation assets=liabilities+equity. It also further classifies items into subcategories. For example, total assets are broken down into current assets (cash, cash equivalents, inventory, etc.) and long term assets (notes payable, long term debt, etc). Liabilities are grouped in a similar manner as well.

This is important because many financial ratios can be derived from this ...

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