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Chapter 34 Statement of financial position

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  • Protecting the intellectual property of the business
    Patents
  • Money (most liquid of current assets)
    Cash
  • Priority over ordinary shares
    Preference shares
  • A method of recording the value or wealth of a business at a given moment in time
    Statement of financial position
  • Agreement with the bank to avoid cashflow problems
    Overdraft
  • Need to be cautious (careful) when valuing a business
    Prudence
  • Money owed for less than one year
    Current liabilities
  • Building, machines, equipment owned by a business
    Non-current (fixed) assets
  • Net current assets (working capital)
    Current assets - current liabilities
  • Assets that can be seen
    Tangible assets
  • Value of funds in the form of shares and retained profit
    Shareholders’ equity/total equity
  • Stock in the form of materials, unfinished goods, finished goods
    Inventory
  • What the business owes
    Liabilities
  • Assets that can’t be seen (e.g. patent/goodwill/)
    Intangible assets
  • What the business owns
    Assets
  • Net assets
    Total assets (current assets + non-current assets) - current liabilities - non-current liabilities
  • Show an ownership of the business
    Ordinary shares
  • Money owed to the business
    Debtors (trade/other receivables)
  • Investments made by business in government bonds or long term shares
    Financial fixed assets
  • Allowance for the wear and tear on fixed tangible assets - a equipment ages the value decreases
    depreciation
  • The ability to convert assets into cash
    Liquidity
  • Everything owned by the business which is not a non-current (fixed) asset
    Current assets
  • Fixed amount over a fixed period of time, less than one year
    Short-term loan
  • When debtors don’t pay
    Bad debts
  • Value for a business’ reputation/brand
    Goodwill
  • Other businesses (suppliers) who have not yet been paid
    Creditors (trade/other payables)
  • Money owed for more than one year e.g. mortgages/debentures/bank loans (more than 1 year)
    Non-current liabilities
  • Money retained in business to help it grow and not distributed to the shareholders. Money invested in the business. NOT CASH
    Reserves and retained earnings (profit and reserves)
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