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Whether you're walking a tightrope or scribbling in your checkbook, balance is a good thing. And, one of the best ways to evaluate a company is to glance at its balance sheet to see what it owns with what it owes.
The balance sheet is a paragon of simplicity and is made up of three components: assets (the stuff it owns), liabilities (the money it owes), and shareholders' equity (the company's value to its shareholders).
Assets take two forms: short-term (or current) assets and long-term assets. Under short-term, there¿s good ol' hard cash. Then, there¿s something called "cash equivalents," which are assets like short-term bonds that can be sold so quickly, they might as well be cash. There you factor in inventory, which (if you're a reasonably competent business owner) you can sell to customers in return for--you guessed it--cash. (The raw materials a company owns to make that inventory also falls under this category.)
Long-term assets are things that are harder to convert into cash. (Think real estate and equipment.) Long-term assets depreciate, meaning they lose some value over time. Also under the long-term category are what's called intangible assets: things like patents and brands, that are important, but hard to quantify. Accountants earn their stripes figuring out the real overall value of these assets.
Once you know your assets, it's time for liabilities. As with assets, liabilities are separated into short-term or current, and long-term. Current liabilities are what a company owes in that year: Things like payments to employees or accounts payable to suppliers. Long-term liabilities are debts paid over several years.
Shareholders' equity is determined by subtracting the liabilities from the assets. That number represents the value of the company after all its bills are paid.
Obviously, investors should pay close attention to balance sheets. Spikes in the amount of debt carried, or a reduction in shareholders' equity, are usually red flags.
Home / Markets / Industries / Energy
Friday, May 16, 2008
Oil Surges to Record Close Above $126 a Barrel
Associated Press
![Oil Dollar [276] 2](/images/General/oil_dollar.jpg)
Oil prices shot to new highs again Friday as traders, unimpressed by U.S. and Saudi efforts to boost supply, kept buying on the belief that prices had more room to rise.
Light, sweet crude for June delivery jumped $2.17 to settle at record close of $126.29 on the New York Mercantile Exchange. Earlier in the session, prices surged to $127.82 a barrel, also a new high. It was the eighth time in the past 10 sessions traders rewrote the record books, and the first time prices topped $127 a barrel.
Investors shrugged off news from Saudi Arabia's oil minister, Ali Naimi, that the country increased its production by 300,000 barrels a day last week in response to requests from customers. The market also had little reaction to the Energy Department's announcement said it would cancel shipments into the Strategic Petroleum Reserve for six months beginning July 1.
Oil industry observers questioned whether either move would have a significant effect on soaring energy prices.
"It's ridiculous because I don't think this is going to bring the price down," said Phil Flynn, an analyst at Alaron Trading Corp., of the Energy Department's move.
The effect of Saudi Arabia's move was also not immediately clear. The increase, which went into effect last Saturday, is relatively small, lifting total output from the world's leading producer to 9.45 million barrels per day by June.
The addition of "300,000 barrels won't make a lot of difference," said Mir Yousufuddin, who monitors crude prices for the U.S. Energy Information Administration.
The announcement came during a visit by President George W. Bush, who was in the kingdom to appeal for a more significant increase in production.
Saudi Arabia often adjusts its output to meet demand, and the increase coincides with the start of the peak driving season in the U.S.
"It's a way to raise production without raising production," Flynn said. "I think it was a way to save face."
Saudi Arabia has in the past acknowledged the ability to produce as much as 11 million barrels a day.
Energy traders were more focused on an upward revision of an oil price forecast by Goldman Sachs from $107 to $141 a barrel for the second half of the year. The investment bank is predicting continued swings in oil prices as prices dip at times because of falling demand before again moving higher.
"Accordingly, we would view any pullback in oil, regardless of the size or duration -- although a correction could be as large as 15% -- as an opportunity to re-establish long positions in oil before the summer," Goldman Sachs advised traders.
Oil prices could rise even higher as U.S. demand picks up during the summer months, when gasoline consumption is typically the heaviest. Traders are clearly betting gasoline prices have a way to go too: Gasoline futures jumped to a record $3.2438 a gallon on the Nymex before easing slightly to settle at $3.2235, up 5.777 cents.
In other Nymex trading, heating oil futures rose 8.04 cents to settle at $3.7028 a gallon. Natural gas futures fell 28.4 cents to $11.115 per 1,000 cubic feet.
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