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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 / Retail
Tuesday, May 13, 2008
Retail Sales Drop 0.2% in April
Associated Press
WASHINGTON--
Consumers, battling soaring gasoline prices and a slumping economy, cut back further on their spending in April.
The Commerce Department reported Tuesday that retail sales dipped 0.2% last month, right in line with economists' expectations.
It was the second drop in the past three months and was led by a 2.8% decline in auto sales, the biggest setback in this category in 10 months. It reflected the problems that automakers are having as a weak economy and soaring gasoline prices cut into demand for new cars.
Excluding autos, retail sales rose by 0.5%, a better performance than had been expected as sales at general merchandise stores, a category that includes big chains such as Wal-Mart, posted a 0.5% increase, much better than the tiny 0.1% rise in March.
However, sales at department stores were down 0.1%, indicating that tough economic times may be pushing people to seek out bargains at giant discount stores.
Many analysts believe the economy has slipped into a recession. However, overall economic growth, as measured by the gross domestic product, has not yet turned negative.
The Bush administration is hoping that a $168 billion economic stimulus package, which includes about $100 billion in direct payments to households, will give the economy a jump-start. The government started making those payments at the end of April.
The Federal Reserve launched an aggressive campaign last September to cut interest rates in an effort to deal with the weakening economy and a severe credit crisis. The central bank cut the federal funds rate for the seventh time last month but indicated it might now pause, with some Fed officials expressing worries that higher inflation could be triggered if interest rates were driven even lower.
Federal Reserve Chairman Ben Bernanke said in a speech Tuesday that the turbulent financial market had eased somewhat but that the situation remained "far from normal." He said the Fed's actions, which included an unprecedented move to allow investment banks to borrow directly from the Fed, "seems to have bolstered confidence."
The 0.2% drop in retail sales in April followed a 0.2% rise in March and a 0.5% decline in February.
Sales at clothing and specialty stores posted a 0.7% increase in April while sales at electronics and appliance stores were up 1.4%.
Sales at furniture stores edged up a slight 0.1%. This sector has been under pressure, reflecting the prolonged two-year slump in home sales.
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