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