5.4 – Statement of Financial Position

• Statement of financial position: this shows the value of a business's assets and liabilities at a particular time
• Assets: these are items of value that are owned by the business (fixed assets, short-term assets)
• Liabilities: these are debts owned by the business (long-term liabilities, short-term liabilities)
• Non-current assets: item owned by the business of for more than 1 year
• Current assets: items owned by the business and used within 1 year
• Non-current liabilities: long-term debts owned by the business, repaid over more than 1 year
• Current liabilities: short-term debts owned by the business, repaid in less than 1 year
• Working Capital = Current Asset - Current Liability
• Shareholders Equity = Total Assets - Total Liabilities
• Capital Employed = Share Equity + Non-current Liabilities
• Uses:

  Show:

  • if value of a business has increased or decreased
  • if a business has sufficient liquidity to pay all its short-term debts

  Analyse:

  • how expansion has been paid for
  • business performance using liquidity ratios