Analysis of Assets and Liabilities- Balance sheet analysis is the analysis of the assets, liabilities, and owner’s capital of the company by the different stakeholders for the purpose of getting the correct financial position of the business at a particular point in time.
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset.
Assets are divided into the following sub-categories:
- Current assets (e.g. cash)
- Long-term assets (e.g. real estate)
- Prepaid and deferred assets (e.g. insurance, rent, interest)
- Intangible assets (e.g. trademark, copyrights)
A ‘liability’ is an obligation that binds a person/company to settle a debt. Liabilities include accounts payable, taxes, wages, deferred revenues, and accrued expenses. Asset-Liability Management (ALM) is concerned with strategic management of assets (uses of funds) and liabilities (sources of funds) of banks, against risks caused by changes in the liquidity position of the bank, interest rates, and exchange rates, and against credit risk and contingency risk.
Liabilities are divided into the following sub-categories.
Current liabilities: The liabilities which is payable within a year is termed as current liabilities
Long-term liabilities: The liabilities which is payable over a long period of time is termed as long-term liabilities.
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