Understanding Business Assets and Financial Equilibrium

Business Assets: Defining Company Resources

Business assets represent the set of assets, rights, and obligations that constitute a company's financial position. This can be viewed from two perspectives:

• Economic Perspective (Assets): Consists of all property and rights owned by the company.
• Financial Perspective (Equity and Liabilities): Collects information on the origin of the company's own and external financial resources.

The Fundamental Accounting Equation

The fundamental equation is defined as: Assets = Equity + Liabilities (A = PN + P).

Asset Classification

Assets are categorized into two main groups:

• Non-Current Assets: Permanent assets available for the long-term development of the company, providing production capacity.
• Current Assets: Assets related to the company's exploitation cycle, specifically elements convertible into liquid assets within less than one year (inventory, receivables, and treasury).

Liability Structure

Liabilities are similarly divided:

• Non-Current Liabilities: Long-term debts.
• Current Liabilities: Short-term payables.

The expanded equation is: ANC + AC = PN + PNC + PC.

Financial Equilibrium and Stability

There are three types of equilibrium:

• Accounting Equilibrium: Occurs when investments are correctly financed.
• Economic Equilibrium: Reached when the company achieves desired profitability.
• Financial Equilibrium: Determined by the appropriate financial structure.

Working Capital and Financial Positions

Working capital is calculated based on long and short-term positions:

• Maximum Stability: Occurs when investments are entirely financed by equity (typically at the company's constitution).
• Normal Situation: A healthy state where working capital is positive, meaning current assets exceed current liabilities.
• Financial Instability: Occurs when working capital is negative (current liabilities exceed current assets). If maintained, this can lead to a suspension of payments or a creditors' contest.
• Accounting Bankruptcy: Occurs when losses have been absorbed and net worth becomes negative, meaning total liabilities exceed total assets.