Finance - Balance sheets

Question 1

What is a balance sheet?

Answer 1

A document describing the financial position of a business at a certain points by looking at the assets, capital and liabilities of a business at a particular day at end of accounting period

Question 2

What are assets?

Answer 2

Items the business owns

Question 3

What are liabilities?

Answer 3

Debts owed by a business to the suppliers and shareholders etc

Question 4

What is equity ?

Answer 4

funds provided by shareholders to set up the business, fund expansions etc

Question 5

What is net current assets and how do you calculate it?

Answer 5

How much money a business has available in short term

=current assets-current liabilities

Question 6

What are trade receivables?

Answer 6

money you receive from trading with customers

Question 7

What are tangible assets?

Answer 7

non current assets that exist physically

Question 8

Intangible assets?

Answer 8

Non current assets that dont have a physical presence but still have value e.g most common is good will

Question 9

What are non current assets?

Answer 9

what the business owns with a lifespan of more than a year e.g machinery

Question 10

What are current assets?

Answer 10

Assets owned by the business that are likely to be turned into cash within a year e.g cash,inventories

Question 11

What are current liabilities?

Answer 11

short term debts that a business has to pay within a year e.g overdrafts

Question 12

What is a receivable?

Answer 12

Money owed to the company by is customers usually on sales credit

Question 13

What are non current liabilities?

Answer 13

Debts due for repayment after a year e.g mortgages

Question 14

What is an exceptional item?

Answer 14

when normal trading value is larger than expected

Question 15

What is an extraordinary item?

Answer 15

occurs infrequently e.g two banks merging

Question 16

What types of people are interested in a businesses balance sheet?

Answer 16

Shareholders-use it to asses a businesses potential to make a profit
Suppliers- More likely to look at the short term position of the company and whether they will have the money to pay bills
Managers - Interested as it shows the performance of the business and can be used to look at how to further improve sales

Question 17

What is the basic structure of a balance sheet?

Answer 17

Non current Assets 
Current Assets 
Current Liabilities 
Non current liabilities 
Equity

Question 18

What is working capital?

Answer 18

Measures the amount of money available to a business to pay its debts and day to day expenses e.g bills

Question 19

How do u calculate working capital?

Answer 19

Current assets - current liabilities

• Its whats remains of a businesses short term assets once its settles all its immediate ones.

Question 20

What is a debenture?

Answer 20

Lones that have fixed interest rates and which are long term so may not even have a repayment date