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Business Management

Statement of Financial Position (IB Business Management)

  1. Assets

    • Non-current Assets

    • Current Assets

  2. Liabilities

    • Non-current Liabilities

    • Current Liabilities

  3. Equity

    • Owner's Equity

    • Retained Earnings

  4. Total Assets = Total Liabilities + Equity


Assets

Non-current Assets

  • Property, Plant, and Equipment

  • Intangible Assets (e.g., patents, trademarks)

  • Long-term Investments

Current Assets

  • Cash and Cash Equivalents

  • Accounts Receivable

  • Inventory

  • Short-term Investments


Liabilities

Non-current Liabilities

  • Long-term Debt

  • Deferred Tax Liabilities

  • Pension Liabilities

Current Liabilities

  • Accounts Payable

  • Short-term Debt

  • Accrued Liabilities

  • Other Current Liabilities


Equity

Owner's Equity

  • Common Stock

  • Preferred Stock

  • Additional Paid-in Capital

Retained Earnings

  • Previous Year’s Retained Earnings

  • Current Year’s Net Income

  • Dividends Paid


Total Assets = Total Liabilities + Equity

This equation reflects the fundamental principle of accounting, where the resources owned by the business (assets) are financed either by borrowing (liabilities) or by the owners' investments (equity).

  1. Liquidity: Current assets should be sufficient to cover current liabilities to ensure the company can meet its short-term obligations. This is often assessed using the current ratio (current assets/current liabilities).

  2. Solvency: Non-current liabilities should be manageable in relation to the company’s total assets. A higher proportion of non-current liabilities may indicate financial risk, especially if the company does not have stable income streams.

  3. Equity Financing: A strong equity position can provide a cushion against losses and is often viewed positively by investors and creditors. Retained earnings reflect the company’s ability to reinvest profits for growth rather than distributing them as dividends.

  4. Asset Management: Efficient management of both current and non-current assets is crucial for sustaining operations and ensuring long-term growth. Companies should regularly assess their asset utilization to maximize returns.

  5. Financial Ratios: Various financial ratios derived from the statement of financial position, such as the debt-to-equity ratio and return on equity, help stakeholders evaluate the company's financial health and operational efficiency.

7R

Business Management

Statement of Financial Position (IB Business Management)

  1. Assets

    • Non-current Assets

    • Current Assets

  2. Liabilities

    • Non-current Liabilities

    • Current Liabilities

  3. Equity

    • Owner's Equity

    • Retained Earnings

  4. Total Assets = Total Liabilities + Equity


Assets

Non-current Assets

  • Property, Plant, and Equipment

  • Intangible Assets (e.g., patents, trademarks)

  • Long-term Investments

Current Assets

  • Cash and Cash Equivalents

  • Accounts Receivable

  • Inventory

  • Short-term Investments


Liabilities

Non-current Liabilities

  • Long-term Debt

  • Deferred Tax Liabilities

  • Pension Liabilities

Current Liabilities

  • Accounts Payable

  • Short-term Debt

  • Accrued Liabilities

  • Other Current Liabilities


Equity

Owner's Equity

  • Common Stock

  • Preferred Stock

  • Additional Paid-in Capital

Retained Earnings

  • Previous Year’s Retained Earnings

  • Current Year’s Net Income

  • Dividends Paid


Total Assets = Total Liabilities + Equity

This equation reflects the fundamental principle of accounting, where the resources owned by the business (assets) are financed either by borrowing (liabilities) or by the owners' investments (equity).

  1. Liquidity: Current assets should be sufficient to cover current liabilities to ensure the company can meet its short-term obligations. This is often assessed using the current ratio (current assets/current liabilities).

  2. Solvency: Non-current liabilities should be manageable in relation to the company’s total assets. A higher proportion of non-current liabilities may indicate financial risk, especially if the company does not have stable income streams.

  3. Equity Financing: A strong equity position can provide a cushion against losses and is often viewed positively by investors and creditors. Retained earnings reflect the company’s ability to reinvest profits for growth rather than distributing them as dividends.

  4. Asset Management: Efficient management of both current and non-current assets is crucial for sustaining operations and ensuring long-term growth. Companies should regularly assess their asset utilization to maximize returns.

  5. Financial Ratios: Various financial ratios derived from the statement of financial position, such as the debt-to-equity ratio and return on equity, help stakeholders evaluate the company's financial health and operational efficiency.