 This shows what the business:  Owns (assets)  Owes (liabilities)  How it has funded (capital employed) its net assets (assets less liabilities)  The capital employed will always equal the net assets - BALANCE

 Fixed assets  Purchased for business use, likely to last more than 12 months  Tangible fixed assets (equipment, machinery, etc)  Intangible fixed assets (brand names, trademarks, etc)  Investments (shares, debentures, etc)  Current assets  Cash or any other liquid asset that is likely to be turned into cash (cash, debtors, stocks)

 Long term liabilities  Debts due to be repaid after twelve months  Current liabilities  Debts that must be settled within a year

- Net assets are the total value of all assets minus its current liabilities. It must be equal to (balance with) the Capital Employed section of the balance sheet. Net assets = Fixed assets + Working Capital Note: Working Capital = current assets – current liabilities

 Share capital (amt of money raised thru shares)  Retained profit (amt of profit after interest, taxes and dividends have been paid)  Reserves (any proceeds from retained profit in previous years)

 This is the long term and permanent capital of the business which has been used to pay for the net assets of a business.  Therefore: Capital employed = Net assets

 Fixed Asset  Current Assets  Stock  Debtors  Cash  Current Liabilities  Creditors  Overdraft  Net Assets  Financed by:  Long term liabilities  Debentures  Share capital  Retained profit  Capital Employed