How to read Balance Sheet?

For Fundamental analysis it is required to understanding balance sheet of company. So let's see how to read balance sheet of company. Let's see step by step

1. Go to https://www.moneycontrol.com (this website is free)
2. In search box type stock name.
3. Click on Financials.

4. Click on Balance Sheet As shown in Figure.
5. Balance sheet will open and as you can see there are two option on top of sheet are Standalone and Consolidated
Consolidated: Consolidated statement reports all activities of company and its subsidiaries as a combined entity
Standalone:Standalone financial statement report these as a separate entity.
(It is depend on the company to which data should calculate for better analysis. but generally we calculate consolidated statement)

So as you can see there are data for every 12 month or every year.
let's understand what exactly these words mean one by one but first we have to understand two word.

1. Asset: Asset is that company owns that can provide future economic benefit. like cash, inventory, buildings,etc.

2. Liabilities: Liabilities are obligations of company- like loan,debt, money that must be paid.

Let's learn about liabilities  

A- EQUITIES AND LIABILITIES:

1. Equity Share Capital: This is portion of the company's money which is raised in exchange for share  of ownership in the company.

2. Reserves and Surplus: This is the cumulative amount of retained earning recorded as a part of share holder equity. company will use this amount for buying fix assets,debt repayment,payment of dividends etc. Share premium also calculate in Reserves and Surplus.

B- NON CURRENT LIABILITIES:

1. Long Term Borrowings: Amount that borrowed for more than 5 year and money borrowed from debenture.
2. Deferred Tax Liabilities: Amount of tax that company didn't pay till date and planning to pay in future.
3. Other Long Term Liabilities: Liabilities that is not covered in Long Term Borrowing and Deferred Tax Liabilities like Security Deposit, Rent Deposit, Deferred Credit, etc.
4. Long Term Provision: Company separate some funds for future expanses and liabilities that amount is Long term provision (generally time is more than 1 year for long term). Ex. Product warranty and Gratuity,

C- CURRENT LIABILITIES:

1. Short Term Borrowings: Borrowed fund for less than one year
2. Trade Payables: Constitute the money a company owes its vendors for inventory related goods, such as business supplies or materials that are part of inventory.
3. Other Current Liabilities:It includes Unpaid Dividends, Current Maturities of long term borrowings, bank over drafts, etc.
4. Shot Term Provision: Separate funds for short terms expanse(less than one year)

Now Let's see ASSETS


A- NON CURRENT ASSETS:

1. Tangible Assets: Assets like Machines, Vehicle, etc (Assets which value will decrease by time to time) you can calculate depreciation amount with some depreciation formulas.
2. Intangible Assets: Assets which we can not touch like computer software, patent, reputation of companyname etc.
3. Capital Work In Progress: Assets which is under construction or work in progress.
4. Other Assets: Assets which not not covered in Tangible, Intangible and Capital Work Progress are cover in other Assets.

B- FIXED ASSETS:

1. Non-Current Investments: Long Term Investment For more than one year. (bonds,stocks,MF)
2. Long Term Loans and Advances: Amount which company offer to their vendor, employe as a loan is covered in this area.
3. Other Non-Current Assets: Interest on FD, Prepaid Expenses, Other Advances

C- CURRENT ASSETS: 

1. Current Investment: Short term Investment of company like Mutual Fund, etc
2. Inventories: There are 3 type of Inventories, Lets assume For Construction Company   1-Raw material inventory(cement, sand, aggregate) 2- Work In Process Inventory(under construction apartments) 3- Finish Goods Inventory(Ready For Possession Apartments)  
3. Trade Receivables: Amount of product which is not receive yet by company is called trade receivables. In Trade Receivables BAD DEBT is subtract from credit sale.
4. Cash And Cash Equivalents: Amount which is in cash and assets which can easily convert in cash.
5. Short Term Loan and Advances: Amount which company offer to their vendor, employe as a loan or advance for short term.
6. Other Current Assets: Assets which is not covered in above given assets are Other Current Assets.