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Assignment on Business Finance

   

Added on  2021-02-20

10 Pages2231 Words37 Views
Business Finance project 4Understanding FinancialInformation

Table of ContentsINTRODUCTION................................................................................................................................3LO 1......................................................................................................................................................31.1 Key Financial Ratios..................................................................................................................3LO 2......................................................................................................................................................62.1 Financial Information legally required from major types of Business Organisation in the UKare.....................................................................................................................................................6LO 3......................................................................................................................................................63.1 Management needs for Financial Information...............................................................................6LO 4......................................................................................................................................................74.1 Other users of Financial Information.........................................................................................7LO 5......................................................................................................................................................85.1 Purpose of main Financial Statements in Business...................................................................8CONCLUSION....................................................................................................................................8REFERENCES.....................................................................................................................................9

INTRODUCTIONBusiness Finance refers to the financing in the company either by investing retainedearnings or borrowing debt from outside in order to finance the company. It includes the variouskey financial ratios which depicts the financial position of the company. It also includes the mainpurpose of the financial information and how the other uses this financial information in takingdecisions for the organisation. It includes the various types of business forms and what are the legalrequirements to be completed to run those business. It also covers that how management uses thisfinancial information in taking the major decisions.LO 11.1 Key Financial RatiosFinancial Ratios refers to the analysis and interpretation of the financial statements using variousratios. The main purposes of ratio analysis are-The main purpose of financial ratios is to check the performance of the company basedon the performance of the previous year.To identify the performance of the company over the years and based on those resultscompany can take certain decisions. The other purpose of financial ratios is to understand the liquidity position, profitabilityposition of the company. Limitations of financial ratios are-The main limitation of the financial statements is that assets of the company are recorded athistorical values. They do not reflect at current information of the company. Every business follows different accounting standards in their company. This makes the twocompany incomparable. Fixed assets in the balance sheet are shown at cost only and there are no changes in the pricelevel which makes comparison difficult.Liquidity Ratios Particulars20xxCurrent Assets525Current Liabilities255Current Ratio2.06:1

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