Balance Sheet Basics Explained (2021)

[@FinanceableTraining]

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[@nick.deck.heroesandsidekicks]

Awesome walkthrough! Well done

[@enemyonscythe]

Great explanation. Looking forward to more videos!

[@_tyler-_-]

Would you be able to break down what all goes into calculating "tangible capital?" I'm trying to calculate the return on tangible capital for a company and I'm having issues understanding what all qualifies as "capital." I'd like to use the metric as a way to track the overall capital intensity of a business, so I'm not sure if that changes the calculation. My current equation for return on tangible capital looks like this: EBITDA / (Total Assets - All Intangible Assets + Long-Term Debt) Thank in advance!

[@FinanceableTraining]

There are a few different ways to calculate Tangible Capital. Putting my investor hat on, I would use: Total Assets - Cash - Non-Interest Bearing Current Liabilities - All Intangibles. Recorded a quick loom overview with the rationale for you here: www.loom.com/share/32deda2bf65e4ab59f781fa9654d7aca

[@_tyler-_-]

@@FinanceableTraining thank you so much

[@FinanceableTraining]

@@_tyler-_- No problem. Glad it was helpful!

[@_tyler-_-]

@@FinanceableTraining Just one follow-up. As an investor, if I wanted to compare this return on tangible capital figure across varying industries what would be the best (true) after-tax earnings figure to use and what's the reasoning? So we have Operating Income (Pre-Tax), EBITDA (Pre-Tax), EBITDA - CapEx (Pre-Tax), Net Income (After-Tax), Net Income + D&A (After-Tax), Cash From Operations (After Tax), or Cash From Operations - CapEx (After-Tax). I lean towards Cash From Operations - CapEx because that is what the company is actually bringing in in terms of cash which is all that really matters in the end right? I've received a lot of responses saying EBITDA should be used in this calculation, but EBITDA isn't the actual cash flowing into my pocket as an investor and I just haven't been able to justify using it. For pre-tax considerations, it's a fine figure, but in terms of true underlying earnings power, I think it's a misrepresentation and would make the figure look much better than it actually is. Again, thank you for your original response and apologies for the long-winded questions.