The assets tell you how the investors’ money has been used. The expenses can be divided into two groups: fixed assets and current assets.
The fixed assets represent the long term investments which a company makes. They include:
A company doesn’t just spend money on long term investments, a lot of money is taken up by the companies activities themselves: buying and selling goods and services.
The following are included in the current assets:
Inventory: A company that sells products has an inventory. This inventory eats a lot of cash, and often has a cost of storage and depreciation.
Receivables: When a company sells products and services, not all clients pay immediately. We call these unpaid invoices receivables.
Cash: cash at bank and on hand
In order to better understand the assets, we’ll continue with the example we used previously.
Liabilities: where the money comes from. The company has been financed by
Assets: where the money goes to. This company has invested its money in