Current & Long Term Debt Current portion of long term debt: amount payable in the next financial year (following 12 months) Long term debt =
Debt-Equity Ratio Ratio: Total Debt / Total Equity = % The higher the debt-equity ratio, the higher the risk of the business Ratio rises/falls if
Drawings The owner can draw / withdraw / take out cash and assets from the business The bank (cash) balance or the asset (e.g. vehicle)
Equity Ownership in the business. No obligation to pay back equity Debt The funder lends the amount to the business. The business has an obligation
Sweat Equity, is where the entrepreneur Contributes time & effort, your “sweat” Contributes knowledge, skills & connections
Owner’s Equity Owner’s Equity = Capital Contribution + Changes below Owner’s Equity Computation Capital contribution by the owner + Net Profit – Net Loss –
Equity means Ownership in the business Interest or Claim to the Assets in the business
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