capital employed

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shareholders funds

  1. share capital- money put into a business when shares were originally issued

this isnt the same as what shares are currently worth

shares traded on the stock exchange are second hand.

firms can raise new capital by issuing new shares; eg rights issue where an existing shareholder is offered a new share at a reduced price

  1. retained profit and reserves

this shows all profit made overr the years that it decided to retain instead of paying out.

retain profits finance future investment or protect firms against future problems.

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long term liabilities

  1. firms borrow money
  2. these include bank loans and debemtures
  3. debts payable under a year come under current liabilities
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capital employes

  • shareholders fund+total liabilities= capital employed
  • all the money the business has got from others is listed under capital employed
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balance sheet

  • the balance sheet is useful to shareholders as it assesses the financial health of a business
  • the net assets figure ffrom the sheet can show this
  • a business with negative or low net assets may be unhealthy. it might be borrowing money to finance short-term assets such as unsold stocks or debtors who may not pay their bills.
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