Balance Sheet - Total Assets versus Total Liabilities

Total of assets and liabilities appearing on the balance sheet represent rough indication of the size of the company.

The true value of a company's assets is entirely difference from the balance sheet total because it may inflated by excessive values set upon intangibles assets such as good will and patents. In many cases where the fixed assets are also carried at a highly exaggerated figure.

Majority of strong companies the good will which constitutes one of their most important assets either does not appear upon the balance sheet at all or is given but a nominal valuation of $1.

There are some practice of writing down the fixed assets, or plant accounts to virtually nothing in order to save depreciation charges. All of this resulted in the total of assets and liabilities appearing on the balance sheet represent rough indication of the size of the company.

The Size of a Company

The size of the company may be measured in terms either of its assets or of its sales revenue.

The size of the company may be measured in terms either of its assets or of its sales revenue. In both cases the significance of the figure is entirely relative, and must be judged against the background of the industry. The assets of a small airline will far higher than those of a department store. From investment stand point, especially the buyer of high grade bonds may consider the important of the size of the company.

This would be true particularly in the case of industrial companies because the smaller company is more subject to sudden adversity than is likely in a company such as public utility or airline industry.