net worth statements ag business management spring 1999

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.

– Shows solvencysolvency (do assets exceed liab. ?)

– Measure liquidityliquidity (will firm meet financial obligations?)

Purpose of Net Worth Statement

Financial Condition - cont.

– Evaluate risk-bearing capacity (how much loss could business sustain?)

– Identify collateral (avail. to support loan)

– Compare records over time to see trends.

Components of Net Worth St.

Assets

Liabilities

Owner Equity

Assets

Current

– Used or sold and converted to cash within 12 months

Non-current

– Used in producing a product or not sold and not converted into cash within 12 months.

Liabilities

Current

– Payable within one year.

Non-current

– Due in more than one year.

Owner Equity

Total assets - Total liabilities

Same as Net Worth