statement of financial position

statement of financial position

BTEC Enterprise component 3

Multiple Choice

A factory is a

• current asset

• non current / fixed asset

• non current liability

• current liability

Multiple Choice

an overdraft is

• current asset

• fixed asset

• current liability

• non current liability

Multiple Choice

stock is

• current asset

• fixed asset

• non current liability

• current liability

Creditors and debtors

• Creditors are owed money by the business - for example a builder might have bought wood from a timber yard, but not paid for it yet. The timber yard is the builder's creditor. This is also called trade credit

• Debtors owe money to the business - for example Sainsbury would be a debtor to Heinz. Heinz will have supplied beans to Sainsbury, which Sainsbury have not paid for yet.

Multiple Choice

A book supplier who has provided textbooks to the school - but the school has yet to pay for them. The bookseller is the schools:

• debtor

• creditor

Multiple Choice

Next plc allows customers like me to buy clothes today, but pay for them over a few months, in installments. I am Next's

• creditor

• debtor

Working Capital

• Businesses need enough cash and other current assets to cover their short term debt. This is called their working capital

• Current assets - current liabilities = working capital

• Working capital is also known as net current assets

Multiple Choice

Current assets = £40

current liabilities = £25

Working Capital =

• £65

• £-15

• £15

• £45

Example

• current assets: stock £5m, cash £3, debtors, £2

• Current liabilities: overdraft £1m, trade credit £3m

• Working capital = current assets - current liabilities

• working capital = £10m - £4m

• working capital = £6m

Multiple Select

Which 3 of the following are current assets?

• machines

• stock

• creditors

• cash

• debtors

Multiple Choice

Which 2 of the following are current liabilities?

• stock

• debtors

• trade creditors

• bank overdraft

• mortgage

Multiple Choice

stock = 80; cash= 20; debtors=10

overdraft = 5 trade credit = 60

what is working capital

• 175

• -15

• 65

• 45

Capital

• Capital means all the investment into the business by the owner

• This could be at the start - called start up capital

• This could also be previous years' profits reinvested in the business (called retained profit)

• Other words for capital are equity or shareholders equity

Calculating the value of a company

• Add up all the current and fixed assets to get total assets

• Add up all the liabilities - current and non current to get total liabilities

• Total assets - total liabilities = net assets

• Gives an idea of how much the business is worth

• Says what would be left over, if all the assets were sold and the money was used to pay off all the debts

Capital = Net Assets

• Net assets = the value of assets which haven't be paid for from loans

• If these assets haven't been paid for from loans they must have been paid for from owners start up capital or retained profits

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Multiple Choice

Net assets =

• total assets + total liabilities

• total assets - total liabilities

• total liabilities - total assets

• capital - current assets

Multiple Choice

Previous year profits that are reinvested in the business

• remained profits

• retained profits

• rancid profits

• rejuvenated profits

Multiple Select

Capital means (tick 2)

• bank loans

• owners start up investment

• retained profits

• current liabilities

Multiple Choice

Capital always equals

• current liabilities

• net current assets

• net assets

• bank loans