Balance Sheet Flashcards

0
Q

Name two main types of post balance sheet events

A

Adjusting and non adjusting events

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1
Q

Define post balance sheet events

A

Events both favourable and unfavourable which occur between the balance sheet event and date on which balance sheet approved by the board of directors

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2
Q

What are adjusting events

A

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

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3
Q

Define an intangible asset

A

Non Physical Asset having a useful life more than 1 year

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5
Q

Give an example of an intangible asset

A

Goodwill, Trademarks, Customer lists for databases

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6
Q

What is the current ratio

A

Relationship between the current assets and current liabilities ie current assets divided by current liabilities

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7
Q

What is another name for current ratio

A

Working capital

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8
Q

What is the liquid ratio

A

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

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9
Q

What is another name for liquid ratio

A

Quick Ratio or asset tes

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10
Q

What is the Debtors Ratio

A

Trade Debtors ignoring prepayments divided by the total credit sales for the period excluding cash

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11
Q

What is the Creditors Ratio

A

Speed at which the business pays its debts to its creditors. Trade Creditors excluding accruals divided by the total credit purchases for the period

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12
Q

What is Return on capital employed

A

Net profit as a percentage of the funds invested I the business or in other words the net worth of the business

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13
Q

Define Shareholders equity

A

total assets less total liabilities
Net worth of the company
Preference shares are not part of the shareholders equity
Ordinary Shares + reserves + PL

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14
Q

Define Net Assets

A

Total Assets less total liabilities which equates to the value of the business

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15
Q

What is Net Current Assets

A

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

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16
Q

Define Capital employed

A

TOTAL ASSETS - CURRENT LIABILITIES
Capital employed is the value of a company’s assets finance by the companys shareholders from the original capital invested by them in the business and by undistributed profits which have been retained in the business. It can be computed as the value of share capital plus reserves plus profit and loss account plus long term borrowings or alternatively as the value of fixed assets plus net current assets (current assets less current liabilities)