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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.
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Tuesday, November 06, 2007
Mattel Recalls 172,000 Toys After Choking Incidents
Associated Press
WASHINGTON--Mattel Inc. (MAT) on Tuesday recalled more than 172,000 Fisher-Price kitchen toys in the United States and Europe because
several children choked and gagged on small, detachable parts.
The company has received 48 reports of small parts separating
from these toys, which feature a sink, a refrigerator and a range. One child choked on a detached piece and needed the Heimlich
maneuver performed to remove the part. One child started to choke and two children had pieces in their mouths and gagged.
"Small
parts choking hazards with toys is one of the most serious dangers to children in the United States," Scott Wolfson, Consumer
Product Safety Commission spokesman, said. "This should send a message to parents to take this toy away from the child immediately."
The
recall involves 155,000 toys sold in the United States, according to the CPSC. It also includes 7,000 items distributed in
Britain, 4,900 in Italy, 4,900 in Germany and 394 in Austria. The Mexican-made toys were sold between May and October.
"We
take toy safety very seriously, so we do everything we can to ensure the safety of our toys," Fisher-Price spokeswoman Juliette
Reashor said.
Mattel Inc., the nation's largest toy maker, issued two major recalls in August for lead-tainted toys
and toys with small, powerful magnets that can cause intestinal perforations if swallowed. It issued another, smaller recall
of lead-contaminated toys last month. All of the previously recalled toys were manufactured in China.
For a free repair
kit, toy owners should contact Fisher-Price at 888-812-7187. For more information, visit http://www.service.mattel.com
or http://www.cpsc.gov.
Other Recalls:
Carefree Humidifiers
About 84,000 Carefree warm mist humidifiers, manufactured in China by Hunter Fan Co., because water can leak into the electrical compartment, posing a risk of fires. The company has received four reports of water leaks, including one that resulted in a fire. No injuries have been reported. The humidifiers were sold online, through catalogs, and at Lowe's, Wal-Mart and other discount and hardware stores around the country between September 2005 and February 2007. For more information on the recall, call 877-288-1145. Details can be found online at http://www.hunterfan.com or http://www.cpsc.gov.
'Skippy' Pool Toys
About 31,000 "Skippy" pool toys, manufactured in China by Swimways Corp., because the elastic tongue of the toy fish can break, forcefully come out and cut the users' hands during launching of the toy. The company has received 24 reports of the toy breaking during use and five reports of injuries to children including one that required stitches to a child's hand. Another child's thumbnail was ripped back from the nail bed. The recalled rubber toy, sold from February through September this year, is shaped like a fish in a blue, purple or green color. The toy's tongue is a loop of elastic tubing that is used for launching the fish across the water like a slingshot. For more information on the recall, call 888-559-4653. Details can be found online at http://www.swimways.com or http://www.cpsc.gov.
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