Balance Sheet
Also known as statement of financial position. Shows the financial position of a
company on a given date
Has two parts - i) Assets shows how these funds have been used at a given time, ii)
and equities and liabilities gives the origin and amount of the company’s finances.
Both sides balances
To analyse how the business has generated profit you consult the#income statement.
To explain how profit has turned into cash you consult the#cash flow statement.
Concept of Equity
Equity equates to#funds#invested by shareholders. In exchange of their contributions, they
hold shares that give them rights to raise opinions on the managerial decisions of the
company and are entitled for dividends.
Equity and Liabilities
To assess the level of financial risk of a company, bankers calculate among other things
the#level of debt, generally calculating the#ratio#of#financial debt to equity.#A debt ratio of
33% means that the bank contribute three times#less#to the financing of the company than the
shareholders.
Main components of Assets
Assets are classified according to their duration
Current asset indicates that the asset will be used for a period less than a year. Cash
comes under current assets.
Book value#= A - L which is equal to the equity.
A = L + SE#Important
