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PaLS and balance sheet analysis - percentage composition

Analysis of the composition of the balance sheet is based on the analysis of the share of respective positions of assets and liabilities in the assets and liabilities totals. It is conducted separately for the assets and for liabilities. Analysis of the composition of the profit and loss statement aims to assess the importance of fixed and current assets in the company's operation and to identify the main elements of fixed and current assets.

It should be also remembered that the composition of assets results from the decisions made by the company related to the investments and its operation. These decisions are closely connected with the nature of the business. The effects of company's decisions regarding the structure of assets affect its flexibility (understood as the ability to adjust to changes in the business environment) and its liquidity of assets (understood as the ability to convert the assets into cash). Therefore, properly prepared balance sheet allows to assess the composition of company's assets and to assess the company's financial standing.

Analysis of the composition of liabilities aims to identify the main sources of comapny's assets financing, including the division into equity sources and sources resulting from liabilities (long- and short-term). Liabilities composition (capital composition) is a result of decisions made by the company related to the choices of the sources of financing, while the consequences of these decisions are important for the risk of insolvency resulting from excess debt (it poses a threat of bankruptcy due to the inability of liabilities coverage). A properly prepared balance sheet allows to assess the composition of company's capital and to assess the company's capitals standing.

Analysis of the composition of profit and loss statement allows to identify the main areas of company's activity (divided into basic operational activity, other operational activity, financial activity), which generate profits or losses. In this analysis, the respective revenues, costs and results are compared to the value of net revenues from sales. Therefore it is possible to define the importance of respective categories of revenues and costs (operating, financial) for the financial result in given period of time. It also includes the particularly important effects of different costs. It is also possible to identify the impact of extraordinary events and taxes on the financial result of the company.

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