Statements of Financial Position Flashcards
1
Q
How are net current assets calculated?
A
CA - CL
2
Q
What do net current assets indicate?
A
The ability to cover ST debt
3
Q
What is gearing?
A
The extent to which a business is reliant on loans
4
Q
What are trade recievables?
A
Amount owed to a business
5
Q
What are trade payables?
A
Amount a business owes to creditors
6
Q
What would a high level of trade recievables indicate?
A
Difficulty controlling debtors
7
Q
What would a high level of trade payables indicate?
A
That a business isn’t offered enough credit or pays their debts on time
8
Q
What are the advantages of gearing?
A
Rapid expansion, magnifies profits, allows for investment
9
Q
What are the disadvantages of gearing?
A
HIgher fixed - interest on loans, can magnify losses
