List your assets
To calculate how much you have in assets, you’ll need to compile a list of all the assets you own.
This can include tangible things like:
- Cash (both what you have in the bank and what’s owed to you through accounts receivable) and investments.
- Office furniture, equipment and electronic devices.
- Real estate.
- Unsold inventory.
- Trademarks and patents.
- Employment contracts.
- Customer lists.
There are also less tangible assets you should factor in, including your brand’s reputation and your customer relationships.
Make a balance sheet
Once you’ve compiled your assets, you’ll want to make a balance sheet. It doesn’t have to be a complicated spreadsheet — you just need to track your assets as well as your liabilities and net worth.
Balance sheets are not only important financial statements, but they also help you easily calculate your total assets.
Add up your assets
You can either use accounting software to add up your assets or do it yourself manually. With the help of a free balance sheet calculator, you can easily determine the total for yourself.
There’s an accounting formula used in double-entry bookkeeping that you can use to check if the number you’ve come up with for your total assets is correct. This is what it looks like:
Total Liabilities + Equity = Total Assets
Your liabilities are the money coming out of your business, whether that be the taxes you owe, your operating expenses or payments on a business loan. Your equity is your company’s net worth (this is also known as your capital).
If the number you came up with when you added up all of your assets matches your total liabilities plus equity, then your initial calculation was correct. If the two sums aren’t the same, you should probably go over your numbers again.
The average total assets formula
Now that you know how much you have currently in assets, you’re just one step away from finding your average total assets. What you’ll want to do is add the amount of assets you had last year to what you have this year, then divide that figure by two.
What does this tell you? First, it’ll give you an idea of how much asset turnover you have.
And second, when you compare your average total assets to your annual sales, you get an idea of the amount of assets you need to support the revenue you’re generating.
If you’ve got high sales and low assets, it shows you’re using your assets very efficiently. If it’s the other way around, it’s a sign you may need to dig a little to find some more efficiencies in your business.
More: Personal Capital matches you with an advisor to help you monitor and manage your finances with confidence.
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