The Business Bulletin
Ask the experts Do you have a burning question that you would like the answer to? Or maybe you’re looking for some advice to help your business? In each edition some questions will be shared and answered by some of The Business Bulletin experts.
Q. What is a balance sheet? How is it beneficial to me and how do I use it? A. A balance sheet, also known as a statement of financial position, is a financial statement that gives a snapshot of the financial balances of an organisation at a specific point in time. The purpose of a balance sheet is to give interested parties that could be potential lenders as well as directors and shareholders information on the company’s financial position. A balance sheet contains what the company owns in the way of physical assets, the bank balances, what liabilities it has as well as what money is owed to it Liabilities are split into two categories: ■ Current liabilities - these are defined as the short-term financial obligations that are due within one year or within a normal operating cycle. ■ Non-current liabilities - these are defined as liabilities that are not expected to be settled within one year or a normal operating cycle for example loans.
here would be bank balances (if
corporation tax it will have to pay
these would appear as a current
when due and allow them to
liability) and money owed to the
plan accordingly to take steps to
business from its sales activity.
reduce this liability or put money
■ Non-current assets - defined as long term investments are those
2. Identify which parts of the business are profitable and which
converted into cash in the current
are not, thus allowing a business
period, examples of this would
owner to allocate resources more
include property, vehicles and
effectively. This will greatly assist
other plant and machinery.
in planning for the future growth
Wendy Tate Bean Counters Q. What is a profit and loss statement?
categories:
And how do I use it effectively for my business?
easily be realised or converted
A. A well-structured and accurate P&L
into cash within a year included
will allow a business owner to
42 | Issue 13 – Finance | 42
aside to pay for it.
that are not expected to be
Similarly, assets are divided into two ■ Current assets - those that can
1. Calculate the potential
in the black of course, otherwise
of the business. 3. Identify a break-even point for the business to allow them to price their goods and services more accurately and in line with the market. James Blacklaws JB Commercial Finance
