3.5 Interpretation of financial statements Flashcards
Fixed assets
Remain in business for more than a year.
Income statement
Measures business performance over a given period of time.
Current assets
converted to cash within a year.
Current liabilities
Things that are owed but are settled in a year.
Non current liabilities
Due over a period of longer than a year.
Working capital
money available for day to day running of the business.
Working capital formula
Current assets- current liabilities
Net assets formula
Total assets- Total liabilities
Total equity
Total investment in business from share capital and reserves.
What are net assets equal to?
Total equity
Balance sheet
A snapshot of businesses assets and liabilities on a particular day.
Liquidity
Able to meet short term commitments.
Gross profit
Revenue- cost of sales
Operating profit
Gross profit- Overheads
Net profit
Operating profit- Income or cost
