What is the formula for an economic balance sheet?

The formula for an economic balance sheet emphasizes a comprehensive view of a firm's value by incorporating both types of assets – marketable and non-marketable – as well as considering both current and implied liabilities.

This approach recognizes that a complete assessment of a firm's financial position requires an understanding that not all assets are easily convertible to cash (marketable assets), while non-marketable assets may include investments in private companies, intellectual property, or long-term projects that do not have a straightforward market value.

By adding both marketable and non-marketable assets, we attain a total valuation of what the firm owns. Moreover, subtracting both current liabilities (like accounts payable) and implied liabilities (such as anticipated future obligations or responsibilities) provides a clearer picture of the true net worth of the company, reflecting its economic reality rather than just its accounting figures.

This formula allows stakeholders to grasp a more accurate assessment of financial health as it encapsulates not only the tangible and market-driven components but also the potential obligations that could impact the firm’s value down the line. Thus, the correct formulation reflects the comprehensive nature of evaluating economic resources versus obligations.