Balance Sheets IB BUSINESS Unit 3 5 What

Balance Sheets IB BUSINESS Unit 3. 5

What is a Balance Sheet • Balance sheets provide a snap shot of the assets and liabilities of a business at a point of time • It shows what the business owns, is owed and owes: – Owns – Assets such as buildings, stock and cash – Is Owed – Money from debtors – Owes – Money to creditors and the bank – Owes – To the investors and owners of the business (they own the profit)

£ £ £ FIXED ASSETS Premises 2 Equipment 4 Vehicles 4 10 CURRENT ASSETS Stock 1 Debtors 1 Cash at Bank 2 4 6 6 CURRENT LIABILITIES Creditors NET WORKING CAPITAL -2 NET ASSETS EMPLOYED -2 8 Financed By SHAREHOLDERS’ FUNDS Share Capital 2 Reserves 2 4 4 4 LONG TERM LIABILITIES Bank Loan CAPITAL EMPLOYED 8

£ £ £ FIXED ASSETS Land & Buildings 120 Equipment & Vehicles 35 Furniture & Furnishings 10 165 CURRENT ASSETS Stock 35 Debtors 4 Cash 2 41 CURRENT LIABILITIES Creditors 15 Bank Overdraft 5 20 NET WORKING CAPITAL 21 NET ASSETS EMPLOYED 186 Finance By: Share Capital 98 Retained Profit 20 Bank Loan 68 CAPITAL EMPLOYED 186

£ £ £ 2001 FIXED ASSETS Shop Premises 50, 000 Fixtures & Fittings 12, 000 Equipment 22, 000 Van 10, 000 94, 000 CURRENT ASSETS Stock 12, 000 Debtors 5, 000 Cash in Bank 1, 000 18, 000 CURRENT LIABILITIES Overdraft 8, 000 Creditors 4, 000 12, 000 NET WORKING CAPITAL 6, 000 NET ASSETS EMPLOYED 100, 000 Finance By: Share Capital 50, 000 Reserves 10, 000 Retained Profit 60, 000 LONG-TERM LIABILITIES Long-term Loans 40, 000 Medium-term Loans 40, 000 CAPITAL EMPLOYED 100, 000

£ £ £ 2001 FIXED ASSETS Shop Premises 60, 000 Fixtures & Fittings 15, 000 Equipment 25, 000 Van 10, 000 110, 000 CURRENT ASSETS Stock 14, 000 Debtors 3, 000 Cash in Bank 3, 000 20, 000 CURRENT LIABILITIES Overdraft 0 Creditors 10, 000 NET WORKING CAPITAL 10, 000 NET ASSETS EMPLOYED 120, 000 Finance By: Share Capital 50, 000 Reserves 15, 000 Retained Profit 5, 000 70, 000 LONG-TERM LIABILITIES Long-term Loans 38, 000 Medium-term Loans 12, 000 50, 000 CAPITAL EMPLOYED 120, 000

E. BLYTON – TIMBER TRADING £ £ FIXED ASSETS Machinery 284. 00 Van 450. 00 734. 00 CURRENT ASSETS Stock 115. 00 Debtors 351. 70 Cash in Hand 211. 88 678. 58 CURRENT LIABILITIES Creditors 324. 25 Bank Overdraft 164. 88 429. 13 NET WORKING CAPITAL (Current Assets – Current Liabilities) 249. 45 NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 983. 45 Finance By: Owners Capital 800. 00 Net Profit 153. 45 953. 45 Debentures 30 CAPITAL EMPLOYED 983. 45

Zawada Electronics

TASK 1 $ $ FIXED ASSETS Property 180, 000 Machinery 120, 000 300, 000 CURRENT ASSETS Stock 80, 000 Debtors 40, 000 Cash in Hand 20, 000 140, 000 CURRENT LIABILITIES Creditors 40, 000 NET WORKING CAPITAL (Current Assets – Current Liabilities) 100, 000 NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 400, 000 Finance By: Loan Capital 250, 000 Share Capital 50, 000 Reserves 100, 000 CAPITAL EMPLOYED 400, 000

TASK 2 $ $ FIXED ASSETS Land 790, 000 CURRENT ASSETS Stock 19, 000 Cash in Hand 31, 000 50, 000 CURRENT LIABILITIES Overdraft 129, 000 NET WORKING CAPITAL (Current Assets – Current Liabilities) (79, 000) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 711, 000 Finance By: Bank Loan 542, 000 Share Capital 50, 000 Reserves 90, 000 Retained Profit 29, 000 CAPITAL EMPLOYED 711, 000

TASK 3 2007 $ (m) 2006 $ (m) FIXED ASSETS Vehicles 194. 1 163. 5 Land 4, 340. 5 3953. 3 4, 534. 6 4, 116. 8 Stock 426. 3 374. 3 Cash 420. 1 767. 8 846. 4 1, 142. 1 1, 606. 2 2, 017. 0 NET WORKING CAPITAL (Current Assets – Current Liabilities) (759. 8) (874. 9) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 3, 774. 8 3, 241. 9 Share Capital 629. 2 582. 9 Reserves 1, 019. 0 620. 8 Long Term Liabilities 2, 126. 6 2, 038. 2 CAPITAL EMPLOYED 3, 774. 8 3, 241. 9 CURRENT ASSETS CURRENT LIABILITIES Overdraft Finance By:

TASK 4 – Imperial Tobacco PLC 2007 $ (m) FIXED ASSETS 2008 $ (m) 6, 255 4, 982 Stock 998 789 Debtors 1, 254 1, 067 Cash 501 305 2, 753 2, 161 CURRENT LIABILITIES 3, 172 3, 002 NET WORKING CAPITAL (Current Assets – Current Liabilities) (419) (841) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 5, 836 4, 141 Bank Loan 4, 695 3, 543 Total Equity 1, 141 598 CAPITAL EMPLOYED 5, 836 4, 141 CURRENT ASSETS Finance By:

Extension Task $ $ FIXED ASSETS Property 1, 500 Machinery 500 2, 000 CURRENT ASSETS Stock 250 Debtors 30 Cash 200 480 CURRENT LIABILITIES Creditors 250 Overdraft 70 320 NET WORKING CAPITAL (Current Assets – Current Liabilities) 160 NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 2, 160 Finance By: Mortgage 500 Debentures 500 Reserves 60 Bank Loan 100 Share Capital 1, 000 CAPITAL EMPLOYED 2, 160

Extension Task – Past Paper Question BBT $ FIXED ASSETS $ 28, 500 CURRENT ASSETS Stock 0 Debtors 28, 000 Cash 2, 000 30, 000 CURRENT LIABILITIES Creditors Y Y = 48, 000 Short-Term Borrowing 0 48, 000 NET WORKING CAPITAL (Current Assets – Current Liabilities) (18, 000) NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 10, 500 Finance By: Loan Capital 0 Retained Profit 8, 500 Share Capital 2, 000 CAPITAL EMPLOYED 10, 500

Limitations of Balance Sheet • Balance Sheets are static documents – financial position can change next day • The value of assets on BS are only estimates, the true value is not known until the asset is sold • Not all assets, especially intangible ones, are included in the balance sheet, e. g. Football Players

Uses of Balance Sheets • We can see the Working Capital figure to show the amount of money available to the business for the day-to-day running of the bus • Capital Employed figure can indicate the size of a firm for potential investors • The asset structure can be analysed to see if there is too much OVERTRADING in stocks or whether they are trying to expand with more fixed assets

Cash Inflow Reserves Building Expenses Creditors Purchases Vehicles Sales Revenue Share Capital Bank Loan Net Flow Debtors Fixed Assets Overdraft Machinery Which of the following can be found on a balance sheet? Values 1 10 2 20 3 30 4 40 5 50 6 60 7 70 8 80 9 90 10 100 11 110 Next