Business Finance: Analysis of Profit and Loss and Financial Position

Business Finance

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
1.1 Statement of profit and loss:..................................................................................................1
1.2Statement of financial position:..............................................................................................2
PART 2............................................................................................................................................2
2.1 Accruals vs cash accounting:.................................................................................................2
2.2 Profit vs cash flows:...............................................................................................................3
PART 3............................................................................................................................................4
3.1 Meaning and purposes of budget:..........................................................................................4
3.2 Benefits of forming a limited company and getting it registered on a stock exchange:........5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Business finance refers to raising and managing funds by business or organisation. It is
about assistance a business that it utilise its resources to meets monetary needs. Financing is the
process of providing funds for business activities, production function and investment. Every
firm needs for funds to operate its functions and business finance provides a source for
organisation to manage its monetary needs (Fairchild and Hahn, 2020). The company which is
selected for this report is T- shirt Ltd. It is trading in garments and struggling in the current
economic climate. This report covers topics such as business performance analysis through P &
L and balance sheet, concept of accrual accounting versus cash accounting and profit and cash
flow. Apart from this, it also covers budget techniques, purpose of preparing budget and benefits
of forming a limited company and listing it on a stock exchange. This report also contains the
ratio analysis of T-shirt limited that shows its comparison with past years (Cox and Nguyen,
2018).
PART 1
1.1 Statement of profit and loss:
Ratio analysis for T-shirt limited:
Ratio analysis is provides comparison to firm of line items in the financial statement of a
business. It is used to evaluate the organisations issues such as liquidity, turnover, operations
efficiency and profitability. The ratios which is calculated for this report are profitability ratios
such as gross profit margin, net profit margin and interest coverage ratio. Ratio can be calculated
by used of profit and loss account and balance sheet (Heil, 2017).
Gross profit margin
2018 2019
gross profit 1261 615
Sales 2101 1366
gross profit ratio 0.60019 0.45022
Net profit margin
2018 2019
Net profit 372 -500
Sales 2101 1366
Ratio 0.177059 (0.36603)
1