1. Net Worth Statements Ag Business Management Spring 1999

2. Objectives n Distinguish between assets and liabilities. n Give examples of each category of assets and liabilities. n Describe the structure and major components of a balance sheet. n Accurately transfer financial information to a balance sheet.

3. Purpose of a Net Worth Statement n Shows financial condition at a specific point in time. solvency – Shows solvency (do assets exceed liab. ?) liquidity – Measure liquidity (will firm meet financial obligations?)

4. Purpose of Net Worth Statement n Financial Condition - cont. – Evaluate risk-bearing capacity (how much loss could business sustain?) – Identify collateral (avail. to support loan) – Compare records over time to see trends.

5. Components of Net Worth St. n Assets n Liabilities n Owner Equity

6. Assets n Current – Used or sold and converted to cash within 12 months n Non-current – Used in producing a product or not sold and not converted into cash within 12 months.

7. Liabilities n Current – Payable within one year. n Non-current – Due in more than one year.

8. Owner Equity n Total assets - Total liabilities n Same as Net Worth