Flashcards in The Balance Sheet - Capital Employed Deck (10):
What is Capital Employed?
- Where all the money came from to create the net worth
- Originally from the shareholders & money loaned to it by other people
What is "Share Capital"?
The money put into the business when the shares were originally issued
What is one way to raise new capital?
& How is this done?
- Issue new shares
- By having a "Rights Issue" - existing shareholders are offered new shares at a reduced price
What are "Retained Profit & Reserves"?
- Shows all the Profit over the years that it retained instead of paying dividends
(Comes under shareholders funds as profits are really the Shareholders money, they have just decided to leave it in the firm rather than take as dividends)
What are the 2 parts of the Capital Employed part of the balance Sheet?
- Shareholders Funds
- Long Term Liabilities
What are the two parts to Shareholders Funds?
- Share Capital:
Money that came from the firms owners
- Retained Profit & Reserves
What are "Long Term Liabilities"?
Money Owed to others:
Any debts that will take more than a year to pay off:
How do you work out Capital Employed?
Add Shareholders funds to long term liabilities
This is equal to Net Assets
eg - All the money the business has got (from shareholders & borrowing) is accounted in Capital Employed
How is the Balance Sheet useful to Stakeholders?
They can assess the financial health of the company
The Net Assets shows this, if assets are growing each year, the company is probably healthy