Net Worth Statements

1
Net Worth Statements

• Ag Business Management
• Spring 1999

2
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.

3
Purpose of a Net Worth Statement

• Shows financial condition at a specific point in
  time.
• Shows solvency (do assets exceed liab. ?)
• Measure liquidity (will firm meet financial
  obligations?)

4
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.

5
Components of Net Worth St.

• Assets
• Liabilities
• Owner Equity

6
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.

7
Liabilities

• Current
• Payable within one year.
• Non-current
• Due in more than one year.

8
Owner Equity

• Total assets - Total liabilities
• Same as Net Worth