Accounting

Question 1

What is a balance sheet?

Answer 1

Financial statement that shows a company’s assets, liabilities and equity at a point in time.

Assets = liabilities + equity

Ie. All assets are either obtained via a liability (loan) or equity

Question 2

What are the different types of assets?

Answer 2

Current = Liquid assets. Cash or cash equivalents. Assets that can be converted into cash within one year. Eg: cash, inventory, accounts receivable.

Non-current assets = Non-liquid assets. Generally take longer than one year to convert to cash. Eg: land, property, plant and equipment (PPE), long term investments

Question 3

What is a cash flow?

Answer 3

Movement of money in and out of a business.

Question 4

What is a profit and loss account?

Answer 4

Shows income, expenses and profit/loss over a period.

Question 5

What is a profit and loss account?

Answer 5

Shows income, expenses and profit/loss over a period.

Question 6

How do investors assess a company’s wellbeing?

Answer 6

Using a number of ratios that can be derived from a balance sheet including debt-to-equity and acid test ratio.