Chapter 25 Flashcards
What is the statement of financial position?
Shows the value of a businesses assets and liabilities over a certain period of time.
What is an asset?
Assets are the items of value owned by the business. Current assets and non-current
What are liabilities?
Liabilities are the debts that a business owes. Can be short term or long term.
What is owners equity and what is the formula?
Owners equity is the total sum of money a shareholder invested into a business (limited company)
Formula: total assets- total liabilities
If the owners equity does net equal to this formula, the statement of financial position is imbalanced.
How are the shareholders fund invested into the company?
Why is the SOFP important?
-Shareholders can see the value of their stake. If the total equity has risen/fallen, the shareholders stake is worth more/less.
- working capital can be calculated
- capital employed can be calculated
- ratios canbe calculated
