Balance Sheet

Sections in the Balance Sheet

• Fixed Assets**:** Long-term items like buildings, machinery, and equipment that a company uses for more than a year.
• Current Assets**:** Short-term items like cash, inventory, and receivables that are expected to be converted into cash or used up within a year.
• Current Liabilities: Short-term debts and obligations like bills, loans, and wages that need to be paid within a year.
• Working Capital**:** The difference between current assets and current liabilities, showing the company's ability to cover its short-term expenses.
• Total Net Assets: The total value of the company's assets after subtracting its liabilities, representing the company's net worth.
• Financed By: This section shows how the company's net assets are funded, including money from shareholders (equity) and long-term loans (debt).
• Capital Employed: Capital Employed shows the sources of capital, which include both equity (shareholders' funds) and long-term liabilities (debt). It highlights how the company's operations are funded by these long-term sources.

Reasons for the Balance Sheet

• Shows the value of the fixed assets owned by the business, which is of interest to investors.
• Helps calculate the company's ability to pay off short-term debts by analysing working capital, which is important for suppliers deciding on credit terms.
• Indicates how much of the business is financed by debt, which can influence investor decisions due to the potential risk of high debt repayments during tough times.