Читать книгу Horse Economics - Catherine E O'Brien - Страница 20

♦An asset is something you own—real or personal, tangible or intangible—that can be assigned a monetary value.

♦A liability is a legal obligation or responsibility for an amount that can be measured and belonging to a particular entity.

♦Equity is the money value of property that has no obligations against it.

Your assets minus your liabilities is your net worth.

A balance sheet gives a picture of your net worth on a fixed date in time (fig. 2.1). In a proper balance sheet, accountants use the equation: assets = liabilities + equity^♦. (“Equity” is often referred to as “net worth.”) The left side of the balance sheet represents your assets and the right side your liabilities and net worth. The total assets should equal liabilities plus net worth.

Determining what your personal balance sheet looks like can help you put your goals into perspective. If you have a negative net worth, start taking steps to improve your balance sheet. Common solutions include reducing debt load or increasing assets.

You can determine where your money comes from, and where it goes over a period of time by using a budget, an important tool for controlling expenses and realizing what areas of spending need to be curbed or increased, depending on your goals.

Your ability to manage cash (called cash flow) goes hand-in-hand with a good budget. Liquidity (the conversion of assets to cash through sale or exchange—a liquid asset is one that is easily converted) is extremely important to solvency; you need to gauge and time your cash flow so your debt obligations are met. You can have plenty of assets on your balance sheet, but if they are not liquid, they are not available at that time and you can end up falling behind on your payments, in foreclosure, or filing bankruptcy.