Unit 7

• An asset is a resource with economic value that a business owns

  A liability is something a business owes
• Assets are classified as current, fixed (tangible), financial and intangible

  Liabilities include loans, accounts payable, mortgages, deferred revenues, bonds, warranties
• Non-Current Asset: First on a balance sheet, Items intended to be used for longer than a year

  Current Asset: Second in order on the balance sheet, Items intended to be transferred into cash inside of 1 year
• Non-current liabilities: Amounts due for repayment after more than a year

  Current liabilities: Amounts due for repayment within one year
• Net Assets = Total assets – Total liabilities = Equity value of the business
• Structure of Balance Sheet:

  1. Non-Current Assets
  2. Current Assets
  3. Current Liabilities
  4. Non-Current Liabilities
  5. Net Assets
  6. Total Equity
• Working capital = Current assets – Current liabilities
• Liquidity is the extent to which a business is able to pay its short-term debts
• Working capital is used to pay for day to day requirements, fund sales made on credit
• Capital employed is the capital invested in the business
• Depreciation is the accounting representation of the reduction of the value of an asset over a period of time
• The annual depreciation charge appears as an expense in the income statement
• Appreciation is positive form of depreciation – the asset gets more valuable
• Net profit = Revenue – (Direct costs + Indirect costs)
• Earnings per share =        Profit for the year/ Number of shares in issue
• •Profit Utilisation is how the profit after tax is used

  •Profit Quality is the sustainability of the profit figure
• Structure of Income Statement:

  1. A firms income from sales
  2. Gross profit
  3. Operating profit
  4. Net profit before tax
  5. Net profit after tax
• The process where by a company manipulates its accounts to show a more favourable financial performance is called “window dressing”
• Core competencies are key abilities that a business possesses that provide it with a competitive advantage
• Key features of the balanced score card:

  Is an assessment achievement of financial and non-financial objectives

  4 different perspectives

  •Financial

  •Customer

  •Internal processes

  •Learning and growth