BALANCE SHEETS Flashcards
What is a balance sheet?
shows the value of a business’s assets and liabilities at a particular time
Non-current assets
items owned by the business for more than a year
Current assets
items owned by the business which are likely to be converted into cash over the next 12 months
e.g. cash, inventories, recieveables
Non-current liabilities
debts that the business does not expect to repay within a year, e.g. loan
Current liabilities
debts owed by a business that are paid back within a year, e.g. interet, tax, payables
net assets
(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
Working capital
current assets - current liabilities
What is shareholders equity
All capital from selling shares and retained profit
Capital employed
- 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
What a balance sheet tells us
- What the business owns and will own
- What a business owes
- How a business raised its capital (non-current liabilities vs shareholders equity)
Info from balance sheet can be used to determine
- Liquidity : working capital
- Gearing : finance through selling shares vs borrowing
- Amount available for growth