Posted by: DD | July 27, 2010

Balance Sheet of Love Life

Been one year in MBA program and now I feel that I don’t need it any more.

But it was not like that an year ago. The mere mention of ‘finance’ used to scare the shit out of me. I am sure there are quite a few like me out there and hence, this post trying to explain most basic of financial tool in simplistic way.

Reason? This July we got our junior batch (SOM 12) inducted in the program. A few of them read the blogs here and a fewer of those few asked why I don’t write often. So I thought to write something that would be helpful along with being interesting. (I hope I do justice) 😛

I remember how difficult it was for me, coming from computer science background, to understand balance sheet in my first term. I never could figure out what is asset and what is a liability. So here is an effort to make you understand balance sheet fundamentals through a more basic and common analogy, “Balance Sheet of Love Life”.

First, let’s go through the basics of a balance sheet.

The hardest thing about Balance sheet is deciphering its vocabulary. It is important to understand the three main sections on the balance sheet.

Assets:  They are the things that you have that are of value to your business. These are the resources that you use to generate earnings. Examples are chairs, a barn, an instrument, land, a factory, and inventory.

Liabilities: can be thought of as obligations. Liabilities are not a bad thing, but if you have too many, you run the risk of going broke or having your resources tied up. Money that is owed to outsiders and lending institutions is categorized here.

Equity: a measurement of the resources that you borrow from outsiders, and resources you have generated and kept in the business. It also includes the value of your shares at the price on which they were issued and not what it is today.

Now keeping these definitions in mind, lets try and make things simpler to understand by taking analogy of our ‘Love Life’. Presented below is the Balance Sheet of Love Life.

Assets
Current Assets
  • your current gf/bf who you like but don’t plan to marry
  • any gifts that you’ve already bought and will give in near future (inventories)
  • pre-paid movie tickets/restaurant bookings made to be utilized in next week                         (pre-paid expense)
  • that ‘mind blowing‘ stuff your bf/gf promised to do to you in return of some                     favour you already did to him/her (I can already see a few faces grinning :D)
Fixed Assets
  • your current gf/bf who you want to marry and who too wants to marry you
Liabilities
Current Liabilities
  • your current gf/bf you no longer like
  • any gifts that you plan to buy in near future (for upcoming b’day, movie, etc)       (provisions)
  • the mobile top-ups that you do for your gf/bf (trust me, its not just guys who                             do it for their gfs)
  • that annoying friend of your gf/bf who you hate but are forced to hang out with
Long Term Liabilities
  • your current gf/bf who wants to marry you but you don’t
Equity
  • perceived hotness of your gf/bf at the time of the start of your relationships

On similar grounds, the Market Value of your Love Life would be the ‘current’ perceived hotness (of your gf) or smartness (of your bf) by your friends.

As always in balance sheet, the sum total of Assets should be equal to that of Liabilities. In case of Love Life, you have a great relationship if Assets = Liabilities and if not, well you can figure it out yourself 🙂

In case you like it or have any thoughts to improve it, please leave a comment.

PS: Now don’t come running to me in case you don’t understand Cash Flows 😀

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Responses

  1. loved it.

  2. “that ‘mind blowing‘ stuff your bf/gf promised to do to you in return of some favor you already did to him/her”, there is at least one extra word in this sentence 😛

  3. I had a wide grin on, the moment before you said “I can already see a few faces grinning”
    Gud one!!

    • Thanks Shaggy 🙂

  4. haha , this Liability is true !

    that annoying friend of your gf/bf who you hate but are forced to hang out wit

    some more assests :

    1. if she has a rich dad .
    2. cell phone of same network 😉
    3. has a hot younger sister 😉

    Liability

    1. works in the same company
    2. has an elder brother who doesnt know abt ur relationship.

    • Well, benefits out of cell phones in same network is not an asset but the ‘synergy’ you get out of the amalgamation of two entities 🙂

  5. hilarious should the word. Tell me, how do you come up with such an article ? Experience ? 🙂

    • Only if you had left you traces, I would be able to tell you. Thanks nevertheless Richa 🙂

  6. Good one!

  7. Love your posts. Nice analogy 🙂
    You could become a prof and make things simpler for everyone 😉

    • Charu, your love for my posts is much appreciated 🙂
      hows new job coming along ??? kuch kaam kar bhi rahi hai ya nahi ?

  8. good one again..

    • Thanks again Punam 🙂

  9. Sahi hai Boss….

    • :), tx Hemal

  10. ap toh FAC mein ache grades mil jayenge 😛
    good article deepeshji 🙂

    • Ravi, it takes more than simple understanding to get good grades in FAC. You’ll get to know soon :D. Thanks btw 🙂

  11. good one…

    • Thanks ‘mads’ 🙂 If only I knew who you are …

  12. True to the Core is how I would describe ur later part of the blog..
    Quiet enlightening 🙂

  13. hey…a very nice analogy 🙂 I like to write too so this morning I google about balance sheet of life and found ur great blog posting 🙂
    I’m taking MBA progam now and like ur experience, I don’t have a finance background so this is also my 1st time doing these all balance sheet, income statement, cash flows, etc. hahaha..
    Your analogy is perfect 🙂


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