statement of financial position

Question 1

contents of a statement of financial position

Answer 1

• lists assets and liabilities
• shareholder’s funds = total assets - total liabilities
• capital employed = shareholder’s funds + long term liabilities
• working capital = current assets - current liabilities

Question 2

uses of a statement of financial position

Answer 2

• show if a value of a business has increased or decreased
• show if a business has sufficient liquidity to pay all its short term debts
• analyse how expansion has been paid for
• analyse business performance using liquidity ratios