Balance Sheet Liquidity

Balance Sheet Liquidity Analysis  requires classification of balance sheet. A classification of the balance sheet items needs to be carried out prior to the
liquidity analysis. Liabilities are classified in the order in which they fall due for
repayment. Since balance sheets are published annually, a distinction between the
short term and long term turns on whether a liability is due in less than or more
than 1 year. Accordingly, liabilities are classified into those due in the short term
(less than 1 year), in the medium and long term (i.e., in more than 1 year) and those
that are not due for repayment.
Likewise, what the company owns can also be classified by duration as follows:

1)assets that will have disappeared from the balance sheet by the following year,
which comprise current assets in the vast majority of cases;

2)assets that will still appear on the balance sheet the following year, which
comprise fixed assets in the vast majority of cases.

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