The balance sheet of a company, such as Coca-Cola, provides a snapshot of its financial position at a specific point in time, in this case, December 31, 2016. It illustrates the fundamental accounting equation: Assets = Liabilities + Equity. This equation is crucial as it reflects the relationship between what the company owns (assets) and what it owes (liabilities and equity).
Assets are categorized into current and long-term assets. Current assets are those that can be converted into cash within one year, including cash and short-term investments. Long-term assets, on the other hand, include property, plant, and equipment (PP&E), which encompasses land, buildings, and machinery. Additionally, intangible assets like trademarks and patents are also considered long-term assets. For Coca-Cola, the total assets reported were $87,270,000,000, indicating a substantial financial base.
Following the assets section, the balance sheet details liabilities, which are obligations the company must settle. Current liabilities are due within one year, while long-term liabilities extend beyond that timeframe. The balance sheet typically presents total liabilities alongside equity, culminating in the total liabilities plus equity equating to total assets. This reinforces the balance sheet's integrity, demonstrating that the company’s resources are financed through either debt or shareholder equity.
In summary, the balance sheet serves as a vital tool for stakeholders to assess a company's financial health, illustrating how assets are financed through liabilities and equity, and confirming the foundational accounting equation remains intact even for large corporations like Coca-Cola.