Unit 2.1: Balance Sheets

Front

What is a balance sheet?

Back

A snapshot of the company’s financial position at a given point in time.

Front

Why do businesses use balance sheets?

Back

To meet obligations, attract investors, and secure loans.

Front

What are the key elements of a balance sheet?

Back

Statement heading, assets section, liabilities section, owner's equity section, and balance totals.

Front

What information is included in the statement heading of a balance sheet?

Back

Who (business name), what (type of statement), and when (the date).

Front

How are assets ordered on a balance sheet?

Back

Assets are ordered in order of liquidity (how quickly they can be converted to cash).

Front

How are liabilities listed on a balance sheet?

Back

Liabilities are listed by maturity date, from short-term to long-term.

Front

What does the owner's equity section show?

Back

The owner's claim of the business, including capital investment.

Front

What is the balance total equation on a balance sheet?

Back

Total assets = total liabilities + owner's equity.

Front

What are financial ratios and why are they important?

Back

Financial ratios are gathered from the balance sheet and help companies assess their financial health and make informed decisions.

Front

What information do financial ratios provide businesses?

Back

Information about liquidity, solvency, and efficiency.