Balance Sheet Flashcards
Name two main types of post balance sheet events
Adjusting and non adjusting events
Define post balance sheet events
Events both favourable and unfavourable which occur between the balance sheet event and date on which balance sheet approved by the board of directors
What are adjusting events
Those which provide new information relative to conditions which existed at balance sheet events eg
Bankruptcy of a debtor which owed the company money at the time the balance sheet was prepared
Events which provide fresh evidence of net value of realisable value of closing stocks
Announcement of a change of tax rates
Define an intangible asset
Non Physical Asset having a useful life more than 1 year
Give an example of an intangible asset
Goodwill, Trademarks, Customer lists for databases
What is the current ratio
Relationship between the current assets and current liabilities ie current assets divided by current liabilities
What is another name for current ratio
Working capital
What is the liquid ratio
Cash and other assets being converted into cash quickly with a view to paying off current liabilities. I.e Current Assets less stock divided by current liabilities
What is another name for liquid ratio
Quick Ratio or asset tes
What is the Debtors Ratio
Trade Debtors ignoring prepayments divided by the total credit sales for the period excluding cash
What is the Creditors Ratio
Speed at which the business pays its debts to its creditors. Trade Creditors excluding accruals divided by the total credit purchases for the period
What is Return on capital employed
Net profit as a percentage of the funds invested I the business or in other words the net worth of the business
Define Shareholders equity
total assets less total liabilities
Net worth of the company
Preference shares are not part of the shareholders equity
Ordinary Shares + reserves + PL
Define Net Assets
Total Assets less total liabilities which equates to the value of the business
What is Net Current Assets
Current Assets less Current liabilities
Otherwise known as working capital
Reflects capital generated during the business day to day activities and if negative the company may have difficulties in financing its day to day activities