Balance sheets Flashcards

1
Q

What is highly geared?

A

When the gearing ratio is over 50%. This means the company is borrowing lots of money

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2
Q

Formula for capital employed

A

Long term liabilities + equity

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3
Q

What does the gearing ratio measure

A

Calculates the proportion(%) of capital employed that is financed by long-term liabilities

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4
Q

Formula for gearing ratio

A

Long term liabilities/ capital employed x 100

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5
Q

Formula for acid test ratio

A

Acid test ratio= (Current assets- Stock)/ Current Liabilities

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6
Q

What is a good current ratio

A

(1.5-2):1

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7
Q

Working capital formula

A

Working capital= current assets - current liabilities

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8
Q

Formula for current ratio

A

Current ratio= Current assets/ Current liabilities

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9
Q

What does liquidity mean

A

Liquidity is how quickly an asset can be turned into cash.

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10
Q

What is working capital

A

Money the business has for the day-to-day expenses.

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11
Q

What is net assets

A

Adding fixed and current assets together then subtracting current and long term liabilities.
TOTAL ASSETS - TOTAL LIABILITIES

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12
Q

What is current liabilities

A

Debt that will be payed within a year for example trade credit and overdraft.

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13
Q

What is a current assets

A

An asset that business can quickly get money for like debtors, cash and stock ( depending on the company)

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14
Q

What is a fixed assets

A

An asset that a business can not get rid off before one year for example buildings, land and machinery.

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15
Q

What 7 things does a balance sheet contain

A

1.Fixed assets
2.Current assets
3.Current liabilities
4.Long term assets
5.Net assets
6.Net current assets
7.Shareholders funds

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16
Q

What is a balance sheet?

A

Sheet of a business’ assists and liabilities at a specific point in time.