Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsBalance SheetThe balance sheet refl ects the fi nancial health of a business at a given time(usually the end of a month or fi nancial year). It lists in detail the various assetsthat the business owns, the liabilities and the value of the shareholders’ equityor net worth of the business:• Assets are the items of value owned by the business;• Liabilities are the amount of money owed to external stakeholders of thebusiness; and• Shareholders‘ equity or shareholders’ fund is the amount that the businessowes the owner.HINTAssetsRM 54,820Fundedthrough:LiabilitiesRM 9,620Shareholders’EquityRM 45,200This diagrammeshows how thebalance sheetworks. The businessrequires assets tooperate and theseassets will be fundedfrom the equity in thebusiness, the profitfrom the operationsof the business or byborrowing moneyfrom external parties.The balance sheet can also be illustrated as:AssetsRM 54,820MinusLiabilitiesRM 9,620EqualsShareholders’EquityRM 45,200The diagramme above shows that the value of all assets owned by thebusiness less the value owed to external stakeholders (liabilities) will equal theshareholders’ fund of the business – that is, the value of the business after alldebts have been paid.16chapter 1 01-21 Eng.indd 168/15/11 5:01:24 PM