Balance sheets Flashcards
What is highly geared?
When the gearing ratio is over 50%. This means the company is borrowing lots of money
Formula for capital employed
Long term liabilities + equity
What does the gearing ratio measure
Calculates the proportion(%) of capital employed that is financed by long-term liabilities
Formula for gearing ratio
Long term liabilities/ capital employed x 100
Formula for acid test ratio
Acid test ratio= (Current assets- Stock)/ Current Liabilities
What is a good current ratio
(1.5-2):1
Working capital formula
Working capital= current assets - current liabilities
Formula for current ratio
Current ratio= Current assets/ Current liabilities
What does liquidity mean
Liquidity is how quickly an asset can be turned into cash.
What is working capital
Money the business has for the day-to-day expenses.
What is net assets
Adding fixed and current assets together then subtracting current and long term liabilities.
TOTAL ASSETS - TOTAL LIABILITIES
What is current liabilities
Debt that will be payed within a year for example trade credit and overdraft.
What is a current assets
An asset that business can quickly get money for like debtors, cash and stock ( depending on the company)
What is a fixed assets
An asset that a business can not get rid off before one year for example buildings, land and machinery.
What 7 things does a balance sheet contain
1.Fixed assets
2.Current assets
3.Current liabilities
4.Long term assets
5.Net assets
6.Net current assets
7.Shareholders funds
