![]() If too little, then they may not be able to pay off short term debts. Working Capital Working Capital is: Current Assets – Current Liabilities If a business has too much working capital then they are not using their resources properly. Turning assets into cash to pay off debts is what normally happens. Liquidity Liquidity shows us whether a business has enough assets to cover its debts. Liabilities Liabilities – what is owed by the business Current Liabilities – eg trade creditors (suppliers of goods on credit), bank overdraft, short-term loans (less than 1 year) Long-term liabilities – normally longer than 1 year – eg mortgage, bank loan Ĭapital Capital – provided by the owner of the business and treated as being owned to the owner of the business Profits – may increase capital Drawings – may decrease capital Reserves – monies retained by business CAPITAL = ASSETS - LIABILITIES īalance Sheet Assets Liabilities & Capital BalanceĪssets Assets – are what a business owns Fixed assets – have a lifespan of more than one year, eg machinery, motor vehicles Current Assets – are constantly changing eg stock, debtors, bank, cash The balance sheet shows a snapshot of a particular date in time. Balance Sheet SG Accounting & Finance Mr McGowanīalance Sheet The profit and loss account shows the history of the business activity throughout the financial year. ![]()
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