FINANCIAL INFORMATION BALANCE SHEET SLIDE 3
PURPOSE Shows a snapshot of the business’s financial position at a particular date Once published, it is out of date immediately Therefore a historical document Records the financial worth of the business SLIDE 3
WHAT DOES IT SHOW? ASSETS Fixed – something the business owns over a long period of time (building, machinery etc) Current – something the business owns over a short period of time - usually one year, (bank, cash, stock, debtors (companies who owe you money) and frequently changes value SLIDE 3
WHAT DOES IT SHOW? LIABILITIES Current – something the business owes over a short period of time and must be paid back within a year Debts to other companies (Creditors) Bank Overdraft Long Term – something the business owes over a long period of time and takes longer than a year to pay back Mortgage Long Term Loan Debentures SLIDE 3
WHAT DOES IT SHOW? Reserves Capital Money and Profit which are kept by the business either to buy new assets or to be put aside in case they experience losses Capital The money invested into the business either by the owner, partners or shareholders This money is then owed back to the people who invested it SLIDE 3
LAYOUT OF A BALANCE SHEET SLIDE 3
+ + - - + + SLIDE 3
MORE DETAIL Fixed Assets – productive assets ie without these the business would not be able to function day to day Current assets – assets that change on a daily basis and can be easily turned into cash Net Current Assets or Working Capital – the difference between the Current Assets and Current Liabilities Shows the ability of the business to meet its short term debts ie can they can pay off their debts with their current assets? SLIDE 3
WORKING CAPITAL OR NET CURRENT ASSETS If Current Liabilities are greater than Current Assets then the business is in danger of being unable to pay off their debts May result in them having to sell fixed assets to survive but by doing this the company may not be able to function properly as these are the productive assets SLIDE 3
NET WORTH Fixed Assets + Net Current Assets Shows the ‘value’ of the business in money terms for a particular date Remember – Historical Information SLIDE 3
FINANCED BY: Bottom section of the Balance Sheet Shows how much was invested (Capital) by Owners, Partners or shareholders The amount of profit kept (reserves) Long Term Liabilities that are due to be paid back but help finance the business Financed by Section should equal the Net Worth figure from the top part of the Balance Sheet SLIDE 3