| forecast for year beginning the 1st. | May 2024 | May 2025 | May 2026 |
| Fixed Assets | 56,624 | 54,081 | 77,791 |
| Current Assets | 217,675 | 260,109 | 505,309 |
| Total Assets | 274,298 | 314,190 | 583,099 |
| Current Liabilities | 156,276 | 125,149 | 193,877 |
| Long Term Liabilities | 13,878 | 4,095 | 11,648 |
| Total Liabilities | 170,153 | 129,244 | 205,525 |
Net Current Assets (Working Capital) | 61,399 | 134,960 | 311,431 |
| Net Assets | 104,145 | 184,946 | 377,574 |
| Capital | 5,000 | 5,000 | 5,000 |
Retained Profits Bfwd | 20,000 | 99,145 | 179,946 |
add: Profit / Loss after Tax | 79,145 | 80,801 | 192,628 |
less: Dividend | 0 | 0 | 0 |
Retained Profits C/Fwd | 99,145 | 179,946 | 372,574 |
Balance Sheet Equity (Reserves) | 104,145 | 184,946 | 377,574 |
Profits, cashflow and solvency forecasts all depend upon the balance sheet. Without positive working capital and equity, none of those are achievable.
Total assets less total liabilities describe net assets. These always equal equity or reserves; hence "balance". A forecast deficit for net assets / equity is a serious matter as that means insolvency.
Net current assets describe working capital. A deficit here describes cash-flow insolvency. While it is possible to address this by taking on new long-term debt, credible changes to your budgets for overheads and investments are a far better solution.
Working to resolve working capital or any other deficits for that matter by using the What-If Calculator is strongly recommended.
Net current assets also describe liquidity; the sole source of cashflow to be generated from core trading activity.
Current or short term assets are cash and cash convertibles such as accounts receivable and stock that can safely be assumed will be turned into cash within twelve months. Prepayments and deposits are included.
Total current liabilities, representing debt payable within twelve months are deducted to arrive at net current assets.
Current liabilities will always include the result for the bank overdraft forecast as overdrafts are repayable on demand.
Although fixed assets less depreciation contribute to forecast net asset value, care should be taken with how much is invested in them.
Depreciation only serves to recognises their residual useful working life, not fair market value. Most fixed asset values net of depreciation put up for sale would almost certainly return a heavy discount against their net book value.
Fixed assets net book value representing a significantly high proportion with respect to balance sheet equity / net worth can raise concerns for a bank, potential investors or other senior creditors.
Because the balance sheet describes the financial condition of any organisation; company or otherwise, there are strict rules attached to its content.
The standard balance test is that total assets must equal total liabilities plus equity / reserves.. If that is not the case, the balance sheet is either in error or subject to misrepresentation; the latter being a serious offence.
An example of of misrepresentation is the ommission of a deferred a liability, representing cash paid in advance for goods or services where delivery of the goods or services paid for has not yet made by the end of the financial year..
Another is by presenting liabilities as assets in order to disguise deficits for reserves. One example of this is a large local authority with net assets heavily in deficit, making it insolvent but showing reserves matching net assets but as a positive valuse rather than as a correct match for their net assets deficit..