1. new frontier s e r v i c e s BALANCE SHEET

2. 2 new frontier s e r v i c e s TABLE OF CONTENTS 1.WHAT IS A BALANCE SHEET? 2.WHAT IS THE USE OF A BS? 3.WHAT IS A BS COMPOSED OF? 4.DEFINITIONS 5.SAMPLE BS 6.MORE INFORMATION ON BS 7.REFERENCES

3. 3 new frontier s e r v i c e s 1. WHAT IS A BALANCE SHEET? A Balance Sheet (BS): Illustrates the financial situation of an organization at a given time Summarizes the actions carried out by the organization Illustrates the profits/losses of a determinate period of time

4. 4 new frontier s e r v i c e s 2. WHAT IS THE USE OF A BS? Balance Sheets are needed to assess and manage a business Balance Sheets: Give the possibility of making informed decisions Allow third parties, such as investors, creditors and shareholders to have a clear idea on the financial situation of the company

5. 5 new frontier s e r v i c e s 3. WHAT IS A BS COMPOSED OF? (I) The Balance sheet has three parts to it: Assets Liabilities Shareholders Equity These are divided into two columns: Assets on the left –Assets are what a company owns in order to carry out its activity (with monetary value) Liabilities on the right –Liabilities are resources that support the assets

6. 6 new frontier s e r v i c e s 3. WHAT IS A BS COMPOSED OF? (II) The outcomes of the two columns must balance each other; this is why its called a balance sheet; what the business owns must have been financed from somewhere Assets Current Assets (e.g. Cash, Inventory) Fixed Assets (e.g. Buildings, Equipment) Liabilities Current Loans (e.g. Utility Bills, Rent Payment) Long term Loans (e.g. Mortgage) Owners Capital Common Stock Profit/Loss

7. 7 new frontier s e r v i c e s 4. DEFINITIONS (I) Assets Current Assets These assets are turned into cash in a short period of time. An example can be Inventory. Stock is sold and generates cash, which can then be invested in buying more stock Fixed Assets These assets are necessary for the company, such as computers, buildings etc, and will allow the company to carry out its activity and generate a profit Liabilities Current Loans These are debts that must be paid within 12 months Long Term Loans These are debts that can be paid after 12 months

8. 8 new frontier s e r v i c e s Owners Capital Is an internal source of funding composed of two main parts: –Common Stock: The initial investment in the company –Retained Earnings: These are the generated profits which were re-invested in the company instead of being distributed Is also known as the Net Worth –Net Worth = Liabilities – Assets –You have a positive net worth when the Assets are higher than the Liabilities –Banks consider the Net Worth when giving loans to companies or individuals because it gives an idea on the potential of returning the loan 4. DEFINITIONS (II)

9. 9 new frontier s e r v i c e s 5. SAMPLE BS Source: INVESTOPEDIA www.investopedia.com/study-guide/cfa-exam/level-1/financial- statements/cfa8.asp

10. 10 new frontier s e r v i c e s 6. MORE INFORMATION AT: www.allbusiness.com www.smartbiz.com www.pipex.co.uk www.businesstown.com www.smallbusinessnotes.com

11. 11 new frontier s e r v i c e s 7. REFERENCES BusinessTown.com. Available at: http://www.businesstown.com/accounting/basic-sheets.asp (Accessed the 05/11/10) http://www.businesstown.com/accounting/basic-sheets.asp Investopedia ULC 2010. Available at: http://www.investopedia.com/study-guide/cfa-exam/level-1/financial- statements/cfa8.asp (Accessed the 15/11/10) http://www.investopedia.com/study-guide/cfa-exam/level-1/financial- statements/cfa8.asp Investor Awareness 2010. Available at: www.investorawareness.com/glossary.html (Accessed the 05/10/10) www.investorawareness.com/glossary.html Moneyterms: Investment/finance glossary/explanations.Available at: http://moneyterms.co.uk/balance_sheet/ (Accessed the 05/11/10) http://moneyterms.co.uk/balance_sheet/

12. 12 new frontier s e r v i c e s Legal disclaimer: The sole responsibility for the content of this presentation lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EACI nor the European Commission are responsible for any use that may be made of the information contained therein.