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Assignment on Business and Management

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Added on  2020-05-28

Assignment on Business and Management

   Added on 2020-05-28

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1Business and ManagementbyCourse:Tutor:University:Department:Date:
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2Question 1 a)Income statement The General purpose of the income statement is to provide the performance of the financialincomes of a business over a particular period. The various these components of an incomestatement have specific benefits. Revenue is significant because the organisation cannot growfaster than its revenues and thus the projected growth of Home Range Ltd can only be gaugedbased on the increase or decrease in its revenues. Cost of goods sold are the direct costsincurred in production, distribution and sale of products or services offered by the company.These values are significant in determining the sale price. Gross profit provides the resourcesto take care of all other expenses of the business entity. A higher and stable gross margin ofthe business is an indication of a more significant potential for positive outcomes. Operatingexpenses are essential in determining the efficiency of the management since theyconsiderably have control of this category of expenditure. Operating income shows theearnings of the company from its normal operations before any other non-operating incomesare deducted. Net Profit shows the profitability of the business.b)Balance sheetThis is a financial statement that shows the current financial position of the entity. It helps incontrolling cash resources of the business to ensure that expenses are paid as at and whenthey occur. Equity in the balance sheet shows the initial investment of the company. Non-current assets also indicate whether the entity will continue to be in operation for more thanone financial year. Additionally, the balance sheet helps in the spreading of the costs of thenon-current assets over several fiscal years instead of the period of acquisition only. It alsoshows its short-term and long-term obligations. Thus, Home Range Ltd can use its statement
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3of financial position to predict whether it will meet its expenses when they fall due and itsoperational existence in the fiscal year and beyond.c)Cash flow statementA cash flow statement explains the variation in liquid resources of the entity by displayinghow cash been acquired under many headings such as operating activities, investmentactivities and financing activities.Question 2 i.Income statement ComponentEffect on the companyCommentsThere is a decrease in Profit before tax from Dec 2016 (£k 31,003 ) to Dec 2017 (£k 28, 514) by £k 2,489 which is a 8% decrease.Not badA decrease in profitability is alarming. However, because the business had on 31 Dec 2016 received a return on equity of 35% and on 1 Jan 2017 taken a loan of £k 1.2 million to expand the business, then this slight drop in profitability within the year is an expectation.There was a 20% increasein sales or £k 18,396GoodAn increase in sales is always good news. However,for the case of Home Range Ltd, this increase is not reflected in the profits because there is a decrease inprofits. But still, the increasein sales worked to lower the decrease in sales due to the loan acquired the same year.
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