ICT2641: Chapter 3: Explanation of Balance Sheet

What is a Balance Sheet? Indicates business value : the 2 “O’s” What business owns (+) What the business owes (-) Total Cash in = Total Cash out

What is required to understand this presentation? Please print out the document under additional material: ICT2641_Example_of_Question.pdf ICT2641_PP_Balance_Sheet Presentation.ppt (this is a printout of the slides used in the presentation)

Investors, loans (bank @ certain interest rate) CASH IN? Owners contribution (e.g. inheritance, saving, pension money) R3 400 000 + Investors, loans (bank @ certain interest rate) R900 000 @ 15% interest = TOTAL CASH IN (R4 300 000)

CASH OUT? Consists of Total Assets Managed: Fixed assets (buildings purchased by owner) R2 500 000) + Equipment and stock (raw materials) R5 800 000 - 3. Money owned to suppliers of stock R4 000 000 = 4. Total Cash Out R4 300 000 TOTAL CASH OUT MUST BALANCE WITH TOTAL CASH IN! See page 69 to 71 in TL201

Balance Sheet based on data provided on lefthandside The following figures were taken from the statements of Sharp Shooter Air Rifle Manufacturers: Balance Sheet based on data provided on lefthandside Cash Resources In: R Owner’s equity R 3 400 000 Owners (Equity) 3 400 000 Long-term loans R 900 000 @ 15% interest Lenders (Loans) 900 000 --------------------------- Current liabilities (creditors plus overdraft) R4 000 000 Total Cash In 4 300 000 Fixed assets (land, buildings, plant and equipment) R2 500 000 Productivity Capacity : Current assets (stock plus debtors) R 5 800 000 Fixed assets 2 500 000 Annual sales R 4 200 000 Raw Material & Work in Process (WIP) 5 800 000 Cost of sales R 2 400 000 Total Assets Managed 8 300 000 Operating expenses R 700 000 Cash Owed to Suppliers (4 000 000) Tax rate 35% -------------------------- Owner’s expected return on his investment 40% Total Cash Out

Balance Sheet based on data provided on lefthandside The following figures were taken from the statements of Sharp Shooter Air Rifle Manufacturers: Balance Sheet based on data provided on lefthandside Cash Resources In: R Owner’s equity R 3 400 000 Owners (Equity) 3 400 000 Long-term loans R 900 000 @ 15% interest Lenders (Loans) 900 000 --------------------------- Current liabilities (creditors plus overdraft) R4 000 000 Total Cash In 4 300 000 Fixed assets (land, buildings, plant and equipment) R2 500 000 Productivity Capacity : Current assets (stock plus debtors) R 5 800 000 Fixed assets 2 500 000 Annual sales R 4 200 000 Raw Material & Work in Process (WIP) 5 800 000 Cost of sales R 2 400 000 Total Assets Managed 8 300 000 Operating expenses R 700 000 Cash Owed to Suppliers (4 000 000) Tax rate 35% -------------------------- Owner’s expected return on his investment 40% Total Cash Out

Balance Sheet based on data provided on lefthandside The following figures were taken from the statements of Sharp Shooter Air Rifle Manufacturers: Balance Sheet based on data provided on lefthandside Cash Resources In: R Owner’s equity R 3 400 000 Owners (Equity) 3 400 000 Long-term loans R 900 000 @ 15% interest Lenders (Loans) 900 000 --------------------------- Current liabilities (creditors plus overdraft) R4 000 000 Total Cash In 4 300 000 Fixed assets (land, buildings, plant and equipment) R2 500 000 Productivity Capacity : Current assets (stock plus debtors) R 5 800 000 Fixed assets 2 500 000 Annual sales R 4 200 000 Raw Material & Work in Process (WIP) 5 800 000 Cost of sales R 2 400 000 Total Assets Managed 8 300 000 Operating expenses R 700 000 Cash Owed to Suppliers (4 000 000) Tax rate 35% -------------------------- Owner’s expected return on his investment 40% Total Cash Out

Balance Sheet based on data provided on lefthandside The following figures were taken from the statements of Sharp Shooter Air Rifle Manufacturers: Balance Sheet based on data provided on lefthandside Cash Resources In: R Owner’s equity R 3 400 000 Owners (Equity) 3 400 000 Long-term loans R 900 000 @ 15% interest Lenders (Loans) 900 000 --------------------------- Current liabilities (creditors plus overdraft) R4 000 000 Total Cash In 4 300 000 Fixed assets (land, buildings, plant and equipment) R2 500 000 Productivity Capacity : Current assets (stock plus debtors) R 5 800 000 Fixed assets 2 500 000 Annual sales R 4 200 000 Raw Material & Work in Process (WIP) 5 800 000 Cost of sales R 2 400 000 Total Assets Managed 8 300 000 Operating expenses R 700 000 Cash Owed to Suppliers (4 000 000) Tax rate 35% -------------------------- Owner’s expected return on his investment 40% Total Cash Out

Total Cash in = Total Cash Out The following figures were taken from the statements of Sharp Shooter Air Rifle Manufacturers: Balance Sheet of Sharp Shooter Air Rifle Manufacturers based on data provided on lefthandside Cash Resources In: R Owner’s equity R 3 400 000 Owners (Equity) 3 400 000 Long-term loans R 900 000 @ 15% interest Lenders (Loans) 900 000 --------------------------- Current liabilities (creditors plus overdraft) R4 000 000 Total Cash In 4 300 000 Fixed assets (land, buildings, plant and equipment) R2 500 000 Productivity Capacity : Current assets (stock plus debtors) R 5 800 000 Fixed assets 2 500 000 Annual sales R 4 200 000 Raw Material & Work in Process (WIP) 5 800 000 Cost of sales R 2 400 000 Total Assets Managed 8 300 000 Operating expenses R 700 000 Cash Owed to Suppliers (4 000 000) Tax rate 35% -------------------------- Owner’s expected return on his investment 40% Total Cash Out Total Cash in = Total Cash Out

End of the Balance Sheet Presentation End of the Balance Sheet Presentation. Please proceed to Income Statement Presentation.