Business Performance Analysis: Statement of Profit and Loss, Statement of Financial Position

Business Finance

PART 1 Business Performance Analysis.....................................................................................................3
1 Statement of profit and loss..................................................................................................................3
2 Statement of financial position.............................................................................................................6
PART 2 Understanding Financial Information & Management of cash......................................................9
1. Accruals vs. cash accounting...............................................................................................................9
2. Profit vs. Cash flows..........................................................................................................................11
PART 3 Budget and company finance.......................................................................................................11
1. Meaning and Purposes of budget.......................................................................................................11
2. Benefits of forming a limited company and getting it registered on a stock exchange......................12
REFERENCES..........................................................................................................................................14
Appendix:..................................................................................................................................................15

PART 1 Business Performance Analysis
1 Statement of profit and loss.
An income statement or profit and loss account is a detailed statement of company’ financial and
it is basically determining the incomes and expenditures for a given period of time. It is showing
the process of conversion of profits into company’s profits and losses (Ainsworth and Deines,
2019). In context of T –shirt limited, it is analysed that company is facing a loss of 500 million in
the year of 2019 and on the contrary it also earned a net profit of 372 million in last year of 2018.
With an aim of analysing the income statement so as to develop a true and fair view of financial
position of business, following ratios are calculated:
Gross profit ratio: it is basically a presentation of excess of revenue over Gross receipt by the
business. It is considering only direct expenses and not indirect expenses. Gross profit is
obtained by deducting COGS from total receipts of business. Gross margin, also referred to as
the revenue growth ratio, and is often measured in terms of revenue.
2018 2019
Gross profit ratio 60.02% 45.02%
Gros
s
pro
fit
rati
o
On the basis of above table this can be find out that company’s gross profit ratio has been
reduced in year 2019 compared to year 2018. In year 2018 the ratio was of 60.2% that reduced
and became of 45.2%. This is so because of lower sales and higher cost of goods sold in year

2019. As well as it states that company is not able to manage their expense in an effective in year
2019 that is leading as lower gross margin.
Net profit ratio: this is a presentation of volume of net profit by the company. The term “net
profit”, represents the total income after deducting all indirect expenses along with tax expenses.
It is the remaining or residual monetary benefit after all the expenditures related to output,
management and finances have been deducted from the total income. This is actually the true and
fair view of an organisation’s performance. This is the presentation metric of how well and
optimised is capital management in the company. . In order to judge success over time, the
metric is generally recorded on a pattern chart. It is often used to contrast a company's outcomes
with its rivals (Brewer, Garrison and Noreen, 2015).
2018 2019
Net profit ratio 17.71% -36.60
Net
pro
fit
rati
o
On the basis of above table this can be find out that company’s net profit ratio has been reduced
in year 2019 compared to year 2018. In year 2018 the ratio was of 17.71% that reduced and