Statement of financial position

The statement of financial position is also known as the list of balances, which is a table or photograph showing the balances owned by the facility during a certain period of time, and is considered extremely important to decision-makers and stakeholders. The statement of financial position discloses all of the entity’s non-current assets; and other assets and deferred expenses within the projects owned by the entity; It also discloses current assets; As cash, facility balances in banks, investments, equity, shareholders, and long-term loans.

It is noteworthy that the statement of financial position is of great importance in the life of the company; It relies on it directly to reveal its financial position, with its assets and the consequent obligations.

Balance Sheet Items

  • Assets: The things that the company owns, including inventory, merchandise, cash, and equipment.
  • Liabilities: These include all obligations arising from the facility, whether through financing or through commercial transactions. Liabilities are classified into:
  • Owners’ Equity: This item refers to everything that employers own in the establishments, and it reveals the difference between the available assets and the liabilities you pay, and it is divided into:
  • Fixed Assets: These are all assets of the facility for the purpose of its service for a certain period of time; Such as land, machinery, equipment, and means of transportation, and the facility may also own intangible assets; such as fame, franchise rights, and patents.
  • Current Assets: These include all assets that are subject to the normal operating cycle of the facility, to be converted into cash within a period of one year or less, and include cash and bank balances, inventory, advance expenses, and financial investments; Such as stocks, bonds, and permissions.
  • Long-Term Liabilities: These include the various obligations incurred by the facility during a period of time estimated at one year or more, and are often owned by establishments with long-term objectives; Including bank loans and bonds.
  • Current Liabilities: These are all dues payable by the facility during a certain period of time estimated at less than one financial year, and its origin comes to achieve operational objectives consisting of overdraft banks, current portions due for payment, accrued expenses, and accrued dividends .
  • Paid in capital.
  • Precautions
  • Retained Earnings.
  • Preferred Stocks.

Uses of the statement of financial position

The uses of this list are to obtain what the facility needs of information about the nature of the investments, their amount in its assets, in addition to the sources financing its investments, the net assets of the facility, and the most important characteristics of the financial position revealed by the list:

  • Liquidity: The period of time that is expected to elapse before assets are converted to cash, or before payments for a liability are completed.
  • Financial flexbilbety: This term refers to the extent to which an entity is able to adjust both the amount and timing of cash flows; This is in order to enable it to respond to the unexpected needs and opportunities it faces, and the facility is characterized by a high degree of flexibility, and has the ability to overcome difficulties and crises that suddenly struck it.
  • Capital Structure Assessment: Refers to the method used by the entity in financing assets based on equity and debt.
  • Calculation of return rates on investment.
  • Risk Rating.
  • The statement of financial position estimates the cash flows that the facility will earn in the future, which will be used in the analysis of the budget and the degree of liquidity.

Balance Sheet Items

writing – on the date : – Last updated: 2022-06-20 21:12:01