Finance - Balance sheets Flashcards
What is a balance sheet?
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
What are assets?
Items the business owns
What are liabilities?
Debts owed by a business to the suppliers and shareholders etc
What is equity ?
funds provided by shareholders to set up the business, fund expansions etc
What is net current assets and how do you calculate it?
How much money a business has available in short term
=current assets-current liabilities
What are trade receivables?
money you receive from trading with customers
What are tangible assets?
non current assets that exist physically
Intangible assets?
Non current assets that dont have a physical presence but still have value e.g most common is good will
What are non current assets?
what the business owns with a lifespan of more than a year e.g machinery
What are current assets?
Assets owned by the business that are likely to be turned into cash within a year e.g cash,inventories
What are current liabilities?
short term debts that a business has to pay within a year e.g overdrafts
What is a receivable?
Money owed to the company by is customers usually on sales credit
What are non current liabilities?
Debts due for repayment after a year e.g mortgages
What is an exceptional item?
when normal trading value is larger than expected
What is an extraordinary item?
occurs infrequently e.g two banks merging
What types of people are interested in a businesses balance sheet?
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
What is the basic structure of a balance sheet?
Non current Assets Current Assets Current Liabilities Non current liabilities Equity
What is working capital?
Measures the amount of money available to a business to pay its debts and day to day expenses e.g bills
How do u calculate working capital?
Current assets - current liabilities
- Its whats remains of a businesses short term assets once its settles all its immediate ones.
What is a debenture?
Lones that have fixed interest rates and which are long term so may not even have a repayment date
