Balance Sheets

Last updated May 23, 2023 Edit

• Business

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

• Can be quickly liquidised to pay bills etc

• Cash

• Trade Creditor (receivables)

• Inventories (stock)

• Land & buildings
• Plant & Machinery
• Goodwill (intangible asset)
  • Brand etc

• Trade creditor (Payables)
• Short-term borrowings

• Long-term borrowings
• Other long-term liabilities

Net position

Net assets = Total assets (value £) - Total liabilities (value £)

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

• Also called net working capital

• Is a measure of a company’s liquidity and short-term financial health

• The difference between a company’s current assets and current liabilities

• A positive NWC indicates that a company can fund its current operations and may be able to invest in future activities and growth.

• Too much working capital is wasteful

  • You are holding assets that won’t make a return, invest the excess

Business