Balance sheets (1): A look at your financial health - Fine Homebuilding

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Building Business

Building Business


Balance sheets (1): A look at your financial health

comments (0) October 25th, 2011 in Blogs

An introduction to how assets, liabilities, and equity must balance

This Khan Academy video teaches the basics, including exactly what assets, liabilities, and equity are.

 

 

Assets give you future economic benefit. Cash is an asset. You can use it buy a house, eat at a restaurant, or make someone dance for you.

Liability is an obligation to someone else. It may be an IOU, it may be a promise to dance for someone sometime in the future.

Equity is what is left of your assets after your liabilities are paid. Equity is what you own.

 

In this video lesson, Sal has $250k in cash and wants to buy a $1M house.

He gets a loan from the bank for $750k to buy the house.

 

His balance sheet looks like this:

Liabilities:

$750k

Assets:

$250k + $750k = $1M

Equity:

$1M - $750k = $250k

 

 

 

 

 

 

 

 

 

This is the first in a series we're calling DIY MBA.


 


This video comes from www.khanacademy.org, a non-profit dedicated to bringing a great education to anyone who wants one.

 


 

 

 



posted in: Blogs, business, diy mba

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