Financial Statements – Balance Sheet

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Presentation transcript:

Financial Statements – Balance Sheet 3.5 Assessing competitiveness

b) Statement of financial position (balance sheet) What you need to know b) Statement of financial position (balance sheet) key information stakeholder interest

Income Statement & Financial Accounts This measures the business' performance (income & costs) over a given period of time, usually one year Balance sheet A snapshot of the business' assets (what it owns or is owed) and its liabilities (what it owes) on a particular day Cash flow statement Shows how the business has generated and disposed of cash and liquid funds during a specific period

The Balance Sheet This is a snapshot of the business' assets (what it owns or is owed) and its liabilities (what it owes) on a particular day - usually the last day of a financial period

The Two Sides of the Balance Sheet Non-Current Assets Share Capital + + Current Assets Reserves (Profit) - Current Liabilities - Non- Current Liabilities NET ASSETS CAPITAL & RESERVES

Non- Current Liabilities Non-Current Assets Non-Current Assets Land & Buildings + Current Assets - Plant & Machinery Current Liabilities - Non- Current Liabilities Goodwill NET ASSETS

Trade Debtors (Receivables) Non- Current Liabilities Current Assets Non-Current Assets Cash Balances + Current Assets - Trade Debtors (Receivables) Current Liabilities - Non- Current Liabilities Inventories (Stocks) NET ASSETS

Current Liabilities + - - Non-Current Assets Trade Creditors (Payables) + Current Assets - Short-term Borrowings Current Liabilities - Non- Current Liabilities Accruals & Provisions NET ASSETS

Other Long-term Liabilities Non- Current Liabilities Non-Current Assets Long-term Borrowings + Current Assets - Other Long-term Liabilities Current Liabilities - Non- Current Liabilities NET ASSETS

Who is Interested in the Balance Sheet? Creditors What is the liquidity position of the business? Is the business able to pay its debts as they fall due? Banks & other lenders How much debt does the business have (gearing)? Is it able to finance its debt What cash and other liquid balances does it have? Employees Is the business solvent? Does the business have a suitably strong liquidity position?