BALANCE SHEETS Flashcards

1
Q

What is a balance sheet?

A

shows the value of a business’s assets and liabilities at a particular time

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2
Q

Non-current assets

A

items owned by the business for more than a year

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3
Q

Current assets

A

items owned by the business which are likely to be converted into cash over the next 12 months

e.g. cash, inventories, recieveables

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4
Q

Non-current liabilities

A

debts that the business does not expect to repay within a year, e.g. loan

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5
Q

Current liabilities

A

debts owed by a business that are paid back within a year, e.g. interet, tax, payables

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6
Q

net assets

A

(current + non-current assets [ total assets]) - current liabilities

Calculates the value of a business as it represents what would be left to owners when all assets are sold and liabilities are paid

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7
Q

Working capital

A

current assets - current liabilities

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8
Q

What is shareholders equity

A

All capital from selling shares and retained profit

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9
Q

Capital employed

A
  • shareholders equity + non-current liabilities
  • is the long term and permanent capital which has been used to purchase assets

CAPITAL EMPLOYED AND NET ASSETS IS ALWAYS THE SAME

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10
Q

What a balance sheet tells us

A
  • What the business owns and will own
  • What a business owes
  • How a business raised its capital (non-current liabilities vs shareholders equity)
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11
Q

Info from balance sheet can be used to determine

A
  • Liquidity : working capital
  • Gearing : finance through selling shares vs borrowing
  • Amount available for growth
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