balance sheets

• What is a balance sheet?

  A financial statement showing assets and liabilities
• Why is a balance sheet crucial for a business?

  It reveals the financial status at a specific date
• What does a balance sheet show about a business?

  What it owns and owes
• How does a balance sheet differ from a profit and loss account?

  A balance sheet shows status on a specific date
• What analogy is used to describe a balance sheet's function?

  Checking your pulse and blood pressure
• What are the main components of a balance sheet?

  • Current assets
  • Fixed assets
  • Current liabilities
  • Long-term liabilities
  • Equity
• What are current assets?

  Assets that can be turned into cash quickly
• What are fixed assets?

  Assets purchased for long-term use
• What are debtors in the context of a balance sheet?

  People or businesses that owe you money
• What are current liabilities?

  Financial commitments due within 12 months
• What are creditors in a balance sheet?

  Businesses or individuals that we owe money to
• What are long-term liabilities?

  Financial commitments due after one year
• What is equity in a balance sheet?

  Money generated and invested by owners
• What is working capital?

  Current assets minus current liabilities
• How is working capital related to financial health?

  It shows liquidity and short-term financial health
• If total assets are $140,000 and total liabilities are $85,000, what is the equity?

  $55,000
• What should the total liabilities plus equity equal?

  Total assets
• What does a balance sheet indicate about a business?

  • Financial position of an enterprise
  • Liquidity of the business
  • Efficiency in using assets
  • Financial risks faced by the business
• What is the significance of the term "balance" in balance sheet?

  It indicates equality between assets and liabilities plus equity