Questions on the balance sheet

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1. What does the balance sheet show?
It shows the assets, liabilities and shows how much the business is worth
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2. What does asset mean?
Anything the business owns of value
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3. What does liabilities mean?
Money owned to other people
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4. Why does a business need to create a balance sheet?
•To show investors •So a manager cab manage his business efficiently
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5. What does it mean by fixed assets?
Assets which the business will owned for more than a year e.g. machinery and cars
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6. What does it meant by current assets?
Assets which the business will own for less than a year e.g. cash and stock
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7. What does it meant by long term liabilities?
Long term debts such as a mortgage
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8. What does it mean by current liabilities?
Short tern debts such as money owed to suppliers
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9. What is working capital?
Current assets - current liabilities = working capital. The money a business has available for the day to day running of the business
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10. If a business has a current ratio of 2:1 what does that mean?
For every £1 of SHORT TERM DEBT the business has £2 available.
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11. If a business has an acid test ratio of 2:1 what does that mean?
For every £1 of debt the business has £2 available. This figure has had the stock taken out so it is a more realistic figure of how much cash the business has to pay it's short term debts
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12. What makes a good ratio?
2:1 for current ratio. 1.5:1 for acid test ratio
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Other cards in this set

Card 2

Front

2. What does asset mean?

Back

Anything the business owns of value

Card 3

Front

3. What does liabilities mean?

Back

Preview of the front of card 3

Card 4

Front

4. Why does a business need to create a balance sheet?

Back

Preview of the front of card 4

Card 5

Front

5. What does it mean by fixed assets?

Back

Preview of the front of card 5
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