A Coggle Diagram about KEY TERMS
(Assets - business possessions
, Liabilities - money the business owes
, Debtors - Money owed to the business
, Creditors - Money the business owes to other businesses
, Working Capital (Net Current Assets) - is the money to finance the day-to-day running of the business. It allows stock to be bought and wages and bills to be paid.
and Drawings - Money taken out of the business by the owner
), WHO LOOKS AT A BALANCE SHEET?
(To see what assets a business has and the liquidity of assets (how much is in the form of cash or can be easily turned into cash)
, Shows how the business is financed
, To provide a summary of the value of all the assets, liabilities and capital in a
, Looking at working capital (Net Current Assets) can indicate whether a business is
able to pay its everyday expenses
and To provide a guide to a business’ value
), WHAT TO LOOK FOR
(The value of debtors – some of these might turn into ‘bad debts’ and may never be recovered.
, How much is owed in terms of short-term and long-term loans
, The value of stocks – it is not good to have too much value tied up in stocks as some of these might never be sold – they might become obsolete.
, To check that Current Assets exceed Current Liabilities (so that short-term debts can be repaid).
and How all of the figures have changed from the previous year.
(Many balance sheets do not include intangible assets, such as goodwill, brand names and the skills of the workforce
, It only relates to the day for which it was drawn up
, The value of some of the assets might not be the amount of money the business would receive if they were sold
and It lacks detail
), KEY CALCULATIONS
(Net Current Assets (Working Capital) Current Assets – Current Liabilities
and Net Assets = Total Assets - Total Liabilities
) and DEFINITION