Net Worth Statements
Ag Business Management Spring 1999
Objectives
Distinguish between assets and liabilities. Give examples of each category of assets and liabilities. Describe the structure and major components of a balance sheet. Accurately transfer financial information to a balance sheet.
Purpose of a Net Worth Statement
Shows financial condition at a specific point in time.
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Shows solvency (do assets exceed liab. ?) Measure liquidity (will firm meet financial obligations?)
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Purpose of Net Worth Statement
Financial Condition - cont.
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Evaluate risk-bearing capacity (how much loss could business sustain?) Identify collateral (avail. to support loan) Compare records over time to see trends.
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Components of Net Worth St.
Assets
Liabilities
Owner
Equity
Assets
Current
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Used or sold and converted to cash within 12 months
Non-current
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Used in producing a product or not sold and not converted into cash within 12 months.
Liabilities
Current
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Payable within one year.
Non-current
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Due in more than one year.
Owner Equity
Total
assets - Total liabilities
Same
as Net Worth