1. The BALANCE Sheet
What happens if we OWE more than we OWN?

2. Balance sheets Lesson Outcomes:
Understand the main elements of a balance sheet
Understand the difference between assets and liabilities
Interpret a balance sheet and deduce simple conclusions such as to determine how a business is financing its activities and what assets it owns

3. Balance Sheet
Financial Photo of the business – financial position at one point in time
Takes on date and shows us the value of what the business has (ITS ASSETS) what it owes (ITS LIABILITIES AND CAPITAL)
Will tell us if the company is financially secure

4. Asset or Liability ?

5. Asset or Liability ?

6. Balance?
This account gets its name from the fact that everything the business has is equal in value to everything that it owes.

7. Liquidity
Liquidity means HOW QUICKLY a business has access to CASH* in order to be able to run day to day.
(* by cash, we mean bank account balances and cheques too!)

8. It’s important to know the liquidity of a company because ….?
If you are the owner or thinking of investing in it, a GOOD business has GOOD liquidity – meaning it can always PAY its bills!

10. 1st Section Fixed (Non-Current)Assets
Business owns – land, property, fixtures, machinery etc
Often not very liquid – long period of time to turn them into cash
Fall in value over time – depreciation

11. 1st Section Current Assets
Also things the business owns – but more liquid
Can be turned into cash more easily :
Cash – Most liquid of all assets
Inventories
Debtors – customers who have not yet paid

12. Fixed or current asset?

13. 2nd Section Current Liabilities
Section of the balance sheet that most people will look at first
All the money the company owes to others that has to be paid in a year – if it has a lot of current liabilites it could face a liquidity crisis
Will it be able to pay all its short term debts?
Included:
Overdrafts – money owed to the bank
Creditors – Money owed to suppliers
Taxation – owe the government money

14. Net current Assets – Working Capital
Net current assets = current assets – current liabilities
Handy way of looking at liquidity of the business
Can pay debts in short term

15. 3rd Section Non-Current (Long term) liabilities
Over a year to pay
Paid eventually but pose less of worry in terms of liquidity
Business would prefer to have long term debt – Bank Loan, Mortgages and Debenture

16. 3rd Section Shareholders Funds
Bit like liabilities – represents money that does not belong to the business
Once the business has paid off its debts anything left over belongs to the owner

18. http://www. businessed. co

19. FIXED VEHICLES LAND BUILDINGS OBSOLETE APPRECIATE DEPRECIATE 12 MONTHS
A ___________ asset is something that has a useful life to a business for a period of longer than _________________. Three good examples of fixed assets are _____________ , __________________, and ________________ . Some fixed assets will actually rise in value over time. This means that they will _______________ in value. Two examples of fixed assets that do this are _____________ and ________________. Other fixed assets normally fall in value over time. These means that they ________________ in value. A common reason for this is that the asset becomes ______________ which means that a newer version becomes available. Examples of this are ________________.

21. Complete Exam question 1 and 2 (a-d), pg 300