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Balance Sheet PowerPoint Presentation
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Balance Sheet

Balance Sheet

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Balance Sheet

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  1. Balance Sheet • Financial Photo of the business – financial position at one point in time • Takes on date and shos 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 • Look at liquidity and what decisions managers have taken

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

  3. 1st Section Fixed Assets • Business owns – land, property, fixtures, tools etc • Often not very liquid – long period of time to turn them into cash • Fall in value over time – depreciation

  4. 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, Stock • Debtors – customers who have not yet paid

  5. 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 • Trade Creditors – Money owed to suppliers • Taxation – owe the government money

  6. 2nd Section Long term liabilities • Over a year – more ‘breathing space’ • Paid eventually but pose less of worry in terms of liquidity • Business would prefer to have long term debt – Bank Loan, Mortgages and Debenture

  7. 3rd Section Owners Capital • Bit like liabilities – represents money that does not belong to the business • Captial = Assets – Liabilities • Once the business has paid off his debts anything left over belongs to the owner

  8. Net current Assets – Working Capital • Net current assets = current assets – current liabilities • Handy way of looking at liquidity of the business • Business would be liquid and does not have liquidity troubles

  9. Current Ratio • A measure of liquidity • Current Ratio = Current Assets Current Liabilities • Less than 1 = more current liabilities • Above 2 = More than enough current assts • Between 1-2 – justt enough to be getting on with

  10. Acid test Ratio • Does not include stock • = current assets – Stock Current Liabilities • Company liquidiy problems might not be able to sell its stock easily • Same rules as before below 1 poor 2 above good

  11. Return on capital employed • Measure of profitability and general performance • Get the net profit from the P&L • And capital from Balance sheet • = net profit Capital • Higher value better