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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 / Innovation
Wednesday, May 14, 2008
Innovation
ModestNeeds.org Wants to Help People With Life's Little Emergenices
Donna Fuscaldo
FOXBusiness
Keith Taylor saw the housing market problems coming at least 18 months ago.
As the founder of Modest Needs, a New York Internet-based charity, Taylor said homeowners looking for help with their mortgage payments started pouring in around February 2006.
“It was no shock to us,’’ said Taylor, who founded the company from his apartment six years ago. “We had situations where specific mortgage companies, very famous mortgage subprime lenders, told us they would prefer a foreclosure than take payment. It’s our job to convince them they have misunderstood the situation.”
Modest Needs isn’t your typical charity that collects money for a specific cause with the donor having little control over where the money is going.
The non-profit company is designed to help people out of one-time tough situations, whether its making a mortgage payment, paying for car insurance or footing the bill for a medical test. Donors are given points and choose the situation to donate to. Points can be tracked to see when enough have been raised to fund a situation.
“We don’t step in situations where the person doesn’t make enough money to pay their bills,’’ said Taylor, who, while in college was helped out of a sticky financial situation from a co-worker who asked for nothing in return. “We’re seeing a lot of situations where the amount their paying for their mortgage has suddenly gone up exponentially.”
Take a quick look at the www.ModestNeeds.org site and you will find requests varying from someone who needs two new tires, to a person who needs assistance paying an electric bill because a surgery prevented the person from working. Modest Needs is designed to help people who wouldn’t qualify for conventional charity but need help with the little emergencies that always seem to crop up.
“One of the reasons I started Modest Needs is I wanted direct involvement in who I helped,’’ said Taylor, noting foundations and grants pay all of the non-profits costs so 100% of the donations from individual donors is passed through to people in need. In 2007, Modest Needs raised $2.05 million to help people, a far cry from the $151,000 it did in the first year.
Donors don’t necessary invest a ton of money individually, but collectively it adds up. Taylor said that 70% of donors received help from Modest Needs in the past.
“Two years ago, we fixed a floor in a home underneath a bathtub for $600,’’ said Taylor. “That person has confirmed monthly income of $660 and every month writes a $1 check and mails it to us.”
People looking for help from Modest Needs must fill out an application online stating their problem and why they need the help. It’s not enough to just say you have a problem--it has to be substantiated with documents. Modest Needs’ small staff goes through a process to confirm the request is legit, requiring proof, whether it’s a mortgage payment or electric bill.
As an added protection, Modest Needs, not the person, would pay the missed mortgage payment or hire and pay the contractor. Modest Needs also determines whether the person would qualify for other types of charity or assistance and turns down those that do.
“We shouldn’t duplicate programs,” said Taylor. “If the federal government has a problem you should be going to them not to us.”
Taylor noted applications are typically processed in less than a day once Modest Needs gets the documentation.
While many people rely on economic indicators to gauge the state of the economy, Taylor said more attention should be paid to charities, since they are the ones on the ground helping the people in need. He said the rising gas prices and talk of a looming recession are weighing on people’s minds these days.
“We’re seeing the cost of food go up, the cost of gas go up…people have less disposable income and even less able to save and provide for a short term emergency,’’ said Taylor. “We’re seeing applications from people we would not have seen applications from at all.”
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