Statement of financial postion

• Liability


  Financial obligation that legally binds a company or individual to pay a debt
• Short-term liability


  • Financial obligation, typically due within a year
• Current liabilities


  • Could be based on firm's operating cycle
  • Operating cycle is time taken to buy inventory and convert it into cash
  • Listed under liabilities on the balance sheet
  • Paid from revenue from operating cycle
• Current assets


  • Assets that a company expects to convert into cash within a year or operating cycle
  • Vital for a company's day-to-day operations
  • Expected to provide liquidity in the short term
• Types of current assets

  • Cash/cash equivalents
  • Accounts receivable (money owed to the company by customers)
  • Inventory (goods held for sale or in the process of being produced for sale)
• Non-current/fixed assets


  Items owned by the business for more than one year
• Non-current liabilities


  Long-term debts owed by the business, repaid over more than one year
• Shareholders' equity


  • Total sum of funds invested into the business by the owners
  • Includes share capital