A snapshot of the business’ assets (what it owns or is owed) and its liabilities (what it owes) on a particular day
Required by any limited liability company
Assets:
- Current assets (yours for less than a year)
- Non-current assets
Liabilities:
- Current liabilities (must be paid back within a year)
- Non-current liabilities
Total equity: Capital raised from share sales + retained profit
Assets
Current Assets
-
Can be quickly liquidised to pay bills etc
-
Cash
-
Trade Creditor (receivables)
-
Inventories (stock)
Non-current Assets
- Land & buildings
- Plant & Machinery
- Goodwill (intangible asset)
- Brand etc
Liabilities
Current liabilities
- Trade creditor (Payables)
- Short-term borrowings
Non-current liabilities
- Long-term borrowings
- Other long-term liabilities
Net position
Net assets = Total assets (value £) - Total liabilities (value £)
Other formulae
Total assets = current assets + non-current assets
Total liabilities = current liabilities + non-current liabilities
Working capital = current assets – current liabilities
Total equity = share capital + reserves
Working Capital
-
Also called net working capital
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Is a measure of a company’s liquidity and short-term financial health
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The difference between a company’s current assets and current liabilities
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A positive NWC indicates that a company can fund its current operations and may be able to invest in future activities and growth.
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Too much working capital is wasteful
- You are holding assets that won’t make a return, invest the excess