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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
Thursday, July 03, 2008
Oil Prices Hit New Record, Back Off Again
Associated Press
Oil prices briefly soared to a new high near $146 a barrel Thursday, extending the previous day's record-shattering rally before easing as the dollar gained ground against the euro.
Americans hitting the road for the July Fourth holiday were confronted with an unwelcome record of their own: The average retail price for regular gasoline jumped to within two-tenths of a penny of $4.10 a gallon, according to AAA, the Oil Prices Information Service and Wright Express.
Light, sweet crude for August delivery added 6 cents to $143.63 on the New York Mercantile Exchange. Earlier in the session, it rose as high as $145.85 a barrel, topping a trading record set the previous day.
Oil prices settled at $143.57 Wednesday, up $2.60 above the previous high. They continued climbing overnight, propelled by a report of lower crude stockpiles in the United States, lingering concerns about conflict with Iran and comments by Saudi Arabia's oil minister suggesting his country would not boost production.
Prices backed off, however, after the European Central Bank did not signal more rate increases. That decision, which followed a widely expected quarter-point rate hike meant to stem inflation in the 15-nation euro zone, led the dollar higher against the euro.
A slumping dollar has been a key driver pushing oil prices up by half this year. Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens, and a falling dollar makes oil less expensive to investors overseas. But when the dollar strengthens, traders have less incentive to buy commodities.
Speaking Thursday in Madrid, Saudi Arabia's oil minister said the world's biggest oil exporter had no immediate plans to boost crude output because there was no need to do so.
Ali Naimi said he was "concerned about the (price) level" and suggested Saudi Arabia is ready to raise production if the kingdom determines supply-and-demand fundamentals have changed. But for now, the minister told reporters, "all our buyers are satisfied and happy."
Soaring fuel costs are squeezing cash-strapped drivers and driving up prices in the U.S., the world's leading oil consumer. The government issued more troubling economic news Thursday, reporting that U.S. employers cut payrolls by 62,000 in June, the sixth straight month of nationwide job losses.
But because the jobs report was largely in line with what analysts expected, it "had little-to-no impact" on oil prices, Tradition Energy analyst Addison Armstrong said.
In other Nymex trading, heating oil futures were largely flat at $4.0785 a gallon, while gasoline futures slipped about 0.3 cent to $3.5465 a gallon. Natural gas futures gained more than 6 cents to $13.451 per 1,000 cubic feet.
In London, Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange before retreating to $144.48, up 23 cents.
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