#Immediacy on speech making

Website value allows you to calculate the tax consequences of a decision ...

Website value allows you to calculate the tax consequences of a decision about money, but it does not tell you what the decision should be. Financial resources The traditional method of assessing the financial resources of a business is to study the balance sheet or, better still, the balance sheets for the last few years, so that the trends can be observed.

We are sure you have studied these very thoroughly with your accountant and there is little we can tell you about them. Their purpose, apart from statutory requirements, is to impress outside shareholders, banks and other creditors.

They are of little use for actually running a business.

One reason balance sheets are of little use is that they are produced once a year, portraying a snapshot of the resources on a particular day, usually several months previously. The other reason is that, because of the accounting conventions followed in preparing the balance sheet, it does not necessarily give a realistic picture of the real financial resources of the business.

For instance, one of the features that the balance-sheet analyst looks for is 'Current Assets' being greater than 'Current Liabilities', and preferably about double.

But conventions dictate that 'Stocks' and 'Debtors' appear under 'Current Assets' and 'Creditors' appears under 'Current Liabilities'. These conventions are based on perfectly sound accounting reasons, but they are completely in conflict with common, sense. Anyone with any business experience knows that one of the easiest ways to go bankrupt is to let 'Stocks' and/or 'Debtors' get out of hand, and that it is an unending struggle to prevent this happening. Similarly, one of the easiest ways to keep a healthy cash balance is not to pay 'Creditors' until the latest possible date.

If the balance sheet is not an effective means of assessing and keeping control of financial resources, how should this be done? we suggest that the answer is to adopt a different approach. Instead of the conventional fixed and working capital one should think in terms of tied and liquid capital. Tied capital consists of things which are not in the form of cash or 'near cash'. These include property, equipment, stocks and work in progress.

Liquid capital, on the other hand, is cash and securities or short-term investments which can be quickly turned into cash.

The various items in the balance sheet are usually valued at website ...

The various items in the balance sheet are usually valued at website value. What basis should be used for tied capital? As described in the section above, th... read more

Cash in hand, bank current and deposit accounts, building-society accounts, national and ...

Cash in hand, bank current and deposit accounts, building-society accounts, national and trustee savings bank accounts, savings certificates, premium bonds, unit tru... read more

Add items above to give your total financial resources. How does this ...

Add items above to give your total financial resources. How does this figure compare with that in your last balance sheet? Write