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The TMTC & LAMCON
GeMS training program
Finance Management
The TMTC &training
a LAMCON LAMCON training program
program

Rule 2

Reading A Balance Sheet

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program
BALANCE SHEET – A
Share Capital 150 Fixed Assets 750
Reserves & Surplus 100
Current Assets 250
Long Term Loans 700
Current Lia 50
1000 1000
BALANCE SHEET – B
Share Capital 450 Fixed Assets 750
Reserves & Surplus 300
Current Assets 250
Long Term Loans 200
Current Lia 50
1000 1000
LAMCON counts where money matters
The TMTC &training
a LAMCON LAMCON training program
program

B/S
Share Capital Fixed Assets

Reserves & Surplus

Long Term Loans Current Assets

Current Liabilities

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

BALANCE SHEET
Share Capital Fixed Assets LTU

Reserves LTS

Long Term Loans

Current Liabilities STS Current Assets STU

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

Working Capital Cycle

1 mth

1 mth 15 days
3 mths

1 mth 15 days 1 mth

3 mths

One cycle takes : 8 mths 3 mths

No. of cycles in a yr : 1.5 4
LAMCON counts where money matters
The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

BALANCE SHEET
Share Capital Fixed Assets LTU

Reserves LTS

Long Term Loans

Current Liabilities STS Current Assets STU

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

B/S A C
LTS 80 LTU 80 LTS 4752 LTU 5154
STS 20 STU 20 STS 2598 STU 2196
100 100 7350 7350
B/S B A
LTS 90 LTU 80 LTS 11670 LTU 11670
STS 10 STU 20 STS 3750 STU 3750
100 100 15420 15420
B/S C B
LTS 70 LTU 80 LTS 6450 LTU 5460
STS 30 STU 20 STS 3300 STU 4290
100 100 9750 9750

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

B/S A
LTS 80 LTU 80 A has used LTF for
STS 20 STU 20 LTP & STF for STP
100 100
B/S B
LTS 90 LTU 80 B has used a part of
STS 10 STU 20 LTF for STP
100 100
B/S C
LTS 70 LTU 80 C has used a part of
STS 30 STU 20 STF for LTP
100 100

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

Working Capital Cycle

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

B/S A
Cash Current Ratio
STS 20 STU 20 Drs (CA : CL)
should be
Inv about 2 : 1
B/S B

}
Cash
STS 10 STU 20 Drs Liquid CA
Inv Non-Liquid CA
B/S C
Liquid Ratio (LCA : CL)
STS 30 STU 20 should be minimum 1:1

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

B/S A
Cash Current Ratio
STS 20 STU 20 Drs (CA : CL)
should be
Inv about 2 : 1
B/S B

}
Cash
STS 10 STU 20 8 10 12
Drs
Inv 12 10 8
B/S C
Liquid Ratio (LCA : CL)
STS 30 STU 20 should be minimum 1:1

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

CR LR
A 2.2 : 1 0.9 : 1

B 1.5 : 1 1.1 : 1

CR Norm 2:1
LR Norm 1:1

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

B/S A
LTS 80 LTU 80 A has used LTF for
STS 20 STU 20 LTP & STF for STP
100 100
B/S B
LTS 90 LTU 80 B has used a part of
STS 10 STU 20 LTF for STP
100 100
B/S C
LTS 70 LTU 80 C has used a part of
STS 30 STU 20 STF for LTP
100 100

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

A healthy company must :

1. use LTFs for LTPs

2. use STFs for STPs

may 3. use LTFs for STPs

but 4. should never use STFs for LTPs

LAMCON counts where money matters

The TMTC &training
a LAMCON LAMCON training program
program

Reading a Balance Sheet – Rule 2

A healthy company must :

maintain a current ratio

(i.e. CA : CL) of about 2 : 1

maintain a liquid ratio

(i.e. LA : CL) of a minimum of 1 : 1

LAMCON counts where money matters