Center of Conflict

The Financial Structure of the firm is at the center of this conflict. Let's begin by identifying the stakeholders and their agendas.

We must make a distinction between "The Company" and "The People That Have a Claim on the Company". The Assets are The Company, and they are listed on the left side of the Balance Sheet. The Liabilities and Owner's Equity on the right side represent the people who paid for the Assets and their current stake. If a bulldozer scraped the Assets into a pile, it would consist of cash, invoices, inventory, bricks, and equipment. Next to the pile a row of people would line up to make a claim a vendor, banker, bondholder, stockholder, and (representing Retained Earnings) a manager. This is why a Balance Sheet always balances. The left is "what is owned"; the right is "who owns it" (see the example below).

Balance Sheet		Liab.& Owner's Equity		Stakeholders
Cash	$4,262	Accounts Payable	$7,583	Vendors
Accounts Receivable	$9,278	Current Debt	$6,000	Bankers
Inventory	$11,605	Long Term Debt	$37,500	Bondholders
Total Current Assets	$25,145	Total Liabilities	$51,083
Plant and equipment	$113,800	Common Stock	$20,276	Stockholders
Accum. Depreciation	($38,313)	Retained Earnings	$29,273	Mgt & Stockholders
Total Fixed Assets	$75,487	Total Equity	$49,549
Total Assets	$100,632	Total Liab. & O. E.	$100,632