Statement of Financial Position (Balance Sheet)
- The Statement of Financial Position contains the financial information required to draw conclusions about the liquidity of the business
- Liquidity is the ability of a business to meet its short term commitments (e.g. payments to creditors) with its available assets
- A business that cannot pay its bills will usually fail very quickly, even if they are profitable
- Managing liquidity is a key way to manage risk in a business - and helps a business to prepare for the unexpected
- The Statement of Financial Position shows the financial structure of a business at a specific point in time
- It identifies a businesses assets and liabilities and specifies the capital (money) used to fund the business
- The Statement of Financial Position is also known as the Balance Sheet
An Example of a Statement of Financial Position for Packer Sports Ltd