A comparative balance sheet is a financial statement that compares the balances of two or more periods, typically the ending balances of the current year and the prior year. The purpose of a comparative balance sheet is to provide a summary of a company's financial position at a given point in time and to show how it has changed over a period of time.
The comparative balance sheet for Hinckley Corporation would provide a comparison of the company's financial position at the end of the current year and the prior year. This comparison would allow stakeholders, such as investors and creditors, to assess the company's financial performance and stability over the period of time covered by the balance sheet.
The balance sheet is divided into two main sections: assets and liabilities. Assets represent the resources owned by the company, such as cash, investments, inventory, and property, plant, and equipment. Liabilities represent the debts and obligations of the company, such as loans, accounts payable, and taxes owed. The balance sheet must balance, meaning that the total value of the assets must equal the total value of the liabilities plus the owners' equity.
When comparing the comparative balance sheets for Hinckley Corporation, stakeholders would be interested in how the values of the assets and liabilities have changed over the period of time covered by the balance sheet. They would also be interested in the changes in the company's owners' equity, which represents the residual interest in the assets of the company after liabilities are paid.
For example, if the company has increased its assets over the period of time covered by the balance sheet, this could indicate that the company has been successful in generating cash and making investments. On the other hand, if the company has increased its liabilities over the same period, this could indicate that the company has taken on additional debt in order to finance its operations or make acquisitions.
In addition to examining the overall changes in the balance sheet, stakeholders would also be interested in specific changes in individual asset and liability accounts. For example, if the company has increased its cash balances over the period of time covered by the balance sheet, this could indicate that the company is generating strong cash flows or has received additional financing. On the other hand, if the company has increased its accounts payable over the same period, this could indicate that the company is having difficulty paying its bills in a timely manner.
Overall, the comparative balance sheets for Hinckley Corporation would provide stakeholders with a summary of the company's financial position at two points in time and allow them to assess the company's financial performance and stability over the period of time covered by the balance sheet. This information is essential for stakeholders to make informed decisions about the company, such as whether to invest in it or extend credit to it.