As the primary source of information for financial analysts is the balance sheet, which contains all the data on the liabilities and assets of the enterprise, expressed in terms of value. Despite the fact that for an experienced analyst, just one look at the balance is enough to get all the necessary information, it’s still more convenient to use the aggregated balance. Let's figure out what it is.
Aggregated balance sheet: an example
The economic-mathematical dictionary suggests that aggregation should be understood as the unification and consolidation of indicators on a certain basis. The main difference between this balance and the usual one is that the grouping of articles is carried out by economic content. Aggregated balance is a picture as a whole, while ordinary balance is a set of details.
If you analyze the liquidity indicators, you can pay attention to the repeatability in the formulas. With the rest of the financial ratios, you can observe the same thing.
Aggregated balance provides an opportunity to calculate the coefficients, and you do not need to repeat the same operations over and over again. As a result, it turns out that the analysis is much faster, and such a balance allows you to quickly calculate very many indicators: stability, turnover, liquidity. Aggregated balance sheet is much easier to read, in addition, in this form it is as close as possible to international reporting standards. But it is worth remembering that the more significant the combination of indicators, the less qualitative and in-depth analysis allows us to produce these data.
An exponential analysis can be done only after adjusting the aggregate balance. At the same time, the balance sheet structure will remain the same, similarly it is customary to allocate assets (fixed and current), capital (own and borrowed), the main equality of the balance sheet remains unchanged. Within the sections, a grouping of individual articles is carried out, since the results of the sections in the balance sheet do not fully correspond to the economic nature of the names. For example, in the balance sheet the result of the second section is called current assets. However, this includes receivables for which payments are expected in more than a year. If an aggregated balance sheet is drawn up, then such receivables are excluded from current assets. But at the moment there is no single rule for its implementation. In the process of aggregating the balance should rely on common sense and understanding of the essence of balance sheet items in an economic sense.
The purpose of the analysis of this type of balance is to obtain a preliminary opinion on the structure and dynamics of the most important indicators of the company. For this purpose, balance sheet indicators are combined into eight main groups, while the classification of assets is carried out according to the degree of liquidity, and liabilities by the degree of urgency of making payments. Groups should be formed taking into account the adjustment of their composition, based on the liquidity of assets and terms of payments for liabilities, which are established according to information from the balance sheet.
The aggregated income statement is most correctly presented in the form of a set of such indicators:
- revenue;
- expenses associated with ordinary activities, which include the cost of goods sold, work, services or products, administrative and commercial expenses;
- profit received through sales;
- other results, which are formed in the form of the difference between operating expenses and income;
- profit obtained through taxation;
- deferred taxes and current income tax;
- net profit.
For all these items, the structure indicators and growth rates of indicators are calculated according to special formulas.