Knowt
Business Management
Statement of Financial Position (IB Business Management)
Assets
Non-current Assets
Current Assets
Liabilities
Non-current Liabilities
Current Liabilities
Equity
Owner's Equity
Retained Earnings
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).
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).
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.
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.
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.
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.
Business Management
Statement of Financial Position (IB Business Management)
Assets
Non-current Assets
Current Assets
Liabilities
Non-current Liabilities
Current Liabilities
Equity
Owner's Equity
Retained Earnings
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).
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).
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.
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.
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.
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.