Balance Sheets IB BUSINESS Unit 3.5

What is a Balance Sheet Balance sheets provide a snap shot of the assets and liabilities of a business at a point of time It shows what the business owns, is owed and owes: Owns – Assets such as buildings, stock and cash Is Owed – Money from debtors Owes – Money to creditors and the bank Owes – To the investors and owners of the business (they own the profit)

NET WORKING CAPITAL -2 8 CAPITAL EMPLOYED FIXED ASSETS Premises 2 £ FIXED ASSETS Premises 2 Equipment 4 Vehicles 10 CURRENT ASSETS Stock 1 Debtors Cash at Bank CURRENT LIABILITIES Creditors 6 NET WORKING CAPITAL -2 NET ASSETS EMPLOYED 8 Financed By SHAREHOLDERS’ FUNDS Share Capital Reserves LONG TERM LIABILITIES Bank Loan CAPITAL EMPLOYED

Furniture & Furnishings 10 165 CURRENT ASSETS Stock Debtors 4 Cash 2 £ FIXED ASSETS Land & Buildings 120 Equipment & Vehicles 35 Furniture & Furnishings 10 165 CURRENT ASSETS Stock Debtors 4 Cash 2 41 CURRENT LIABILITIES Creditors 15 Bank Overdraft 5 20 NET WORKING CAPITAL 21 NET ASSETS EMPLOYED 186 Finance By: Share Capital 98 Retained Profit Bank Loan 68 CAPITAL EMPLOYED

LONG-TERM LIABILITIES Long-term Loans 40,000 Medium-term Loans £ £ 2001 FIXED ASSETS Shop Premises 50,000 Fixtures & Fittings 12,000 Equipment 22,000 Van 10,000 94,000 CURRENT ASSETS Stock Debtors 5,000 Cash in Bank 1,000 18,000 CURRENT LIABILITIES Overdraft 8,000 Creditors 4,000 NET WORKING CAPITAL 6,000 NET ASSETS EMPLOYED 100,000 Finance By: Share Capital Reserves Retained Profit 60,000 LONG-TERM LIABILITIES Long-term Loans 40,000 Medium-term Loans CAPITAL EMPLOYED

LONG-TERM LIABILITIES Long-term Loans 38,000 Medium-term Loans 12,000 £ £ 2001 FIXED ASSETS Shop Premises 60,000 Fixtures & Fittings 15,000 Equipment 25,000 Van 10,000 110,000 CURRENT ASSETS Stock 14,000 Debtors 3,000 Cash in Bank 20,000 CURRENT LIABILITIES Overdraft Creditors NET WORKING CAPITAL NET ASSETS EMPLOYED 120,000 Finance By: Share Capital 50,000 Reserves Retained Profit 5,000 70,000 LONG-TERM LIABILITIES Long-term Loans 38,000 Medium-term Loans 12,000 CAPITAL EMPLOYED

E. BLYTON – TIMBER TRADING £ FIXED ASSETS Machinery 284.00 Van 450.00 734.00 CURRENT ASSETS Stock 115.00 Debtors 351.70 Cash in Hand 211.88 678.58 CURRENT LIABILITIES Creditors 324.25 Bank Overdraft 164.88 429.13 NET WORKING CAPITAL (Current Assets – Current Liabilities) 249.45 NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 983.45 Finance By: Owners Capital 800.00 Net Profit 153.45 953.45 Debentures 30 CAPITAL EMPLOYED

Zawada Electronics

TASK 1 FIXED ASSETS Property 180,000 Machinery 120,000 300,000 $ FIXED ASSETS Property 180,000 Machinery 120,000 300,000 CURRENT ASSETS Stock 80,000 Debtors 40,000 Cash in Hand 20,000 140,000 CURRENT LIABILITIES Creditors NET WORKING CAPITAL (Current Assets – Current Liabilities) 100,000 NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 400,000 Finance By: Loan Capital 250,000 Share Capital 50,000 Reserves CAPITAL EMPLOYED

TASK 2 FIXED ASSETS Land 790,000 CURRENT ASSETS Stock 19,000 $ FIXED ASSETS Land 790,000 CURRENT ASSETS Stock 19,000 Cash in Hand 31,000 50,000 CURRENT LIABILITIES Overdraft 129,000 NET WORKING CAPITAL (Current Assets – Current Liabilities) (79,000) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 711,000 Finance By: Bank Loan 542,000 Share Capital Reserves 90,000 Retained Profit 29,000 CAPITAL EMPLOYED

TASK 3 FIXED ASSETS Vehicles 194.1 163.5 Land 4,340.5 3953.3 4,534.6 2007 $ (m) 2006 $ (m) FIXED ASSETS Vehicles 194.1 163.5 Land 4,340.5 3953.3 4,534.6 4,116.8 CURRENT ASSETS Stock 426.3 374.3 Cash 420.1 767.8 846.4 1,142.1 CURRENT LIABILITIES Overdraft 1,606.2 2,017.0 NET WORKING CAPITAL (Current Assets – Current Liabilities) (759.8) (874.9) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 3,774.8 3,241.9 Finance By: Share Capital 629.2 582.9 Reserves 1,019.0 620.8 Long Term Liabilities 2,126.6 2,038.2 CAPITAL EMPLOYED

TASK 4 – Imperial Tobacco PLC FIXED ASSETS 6,255 4,982 CURRENT ASSETS Stock 998 789 Debtors 1,254 1,067 Cash 501 305 2,753 2,161 CURRENT LIABILITIES 3,172 3,002 NET WORKING CAPITAL (Current Assets – Current Liabilities) (419) (841) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 5,836 4,141 Finance By: Bank Loan 4,695 3,543 Total Equity 1,141 598 CAPITAL EMPLOYED

Extension Task FIXED ASSETS Property 1,500 Machinery 500 2,000 $ FIXED ASSETS Property 1,500 Machinery 500 2,000 CURRENT ASSETS Stock 250 Debtors 30 Cash 200 480 CURRENT LIABILITIES Creditors Overdraft 70 320 NET WORKING CAPITAL (Current Assets – Current Liabilities) 160 NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 2,160 Finance By: Mortgage Debentures Reserves 60 Bank Loan 100 Share Capital 1,000 CAPITAL EMPLOYED

Extension Task – Past Paper Question BBT $ FIXED ASSETS 28,500 CURRENT ASSETS Stock Debtors 28,000 Cash 2,000 30,000 CURRENT LIABILITIES Creditors Y Y = 48,000 Short-Term Borrowing 48,000 NET WORKING CAPITAL (Current Assets – Current Liabilities) (18,000) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 10,500 Finance By: Loan Capital Retained Profit 8,500 Share Capital CAPITAL EMPLOYED

Limitations of Balance Sheet Balance Sheets are static documents – financial position can change next day The value of assets on BS are only estimates, the true value is not known until the asset is sold Not all assets, especially intangible ones, are included in the balance sheet, e.g. Football Players

Uses of Balance Sheets We can see the Working Capital figure to show the amount of money available to the business for the day-to-day running of the bus Capital Employed figure can indicate the size of a firm for potential investors The asset structure can be analysed to see if there is too much OVERTRADING in stocks or whether they are trying to expand with more fixed assets

Which of the following can be found on a balance sheet? Next Cash Expenses Sales Revenue Debtors Values 1 10 2 20 Inflow Creditors Share Capital Fixed Assets 3 30 4 40 5 50 Reserves Purchases Bank Loan Overdraft 6 60 7 70 8 80 9 90 Building Vehicles Net Flow Machinery 10 100 11 110 Which of the following can be found on a balance sheet? Next 17