Business Finance: Analysis of Profit and Loss, Financial Position, Accrual Accounting vs Cash Accounting, Budgeting
Added on 2023-01-04
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Business Finance
Contents
Part 1 Business Performance Analysis............................................................................................3
1.1 Analysis of statement of Profit or Loss............................................................................3
1.2 Analysis of statement of Financial Position.....................................................................4
Part 2 Understanding Financial Information and cash management...............................................5
2.1 Concept of Accrual accounting versus cash accounting..................................................5
2.2 Difference between profit and cash flow..........................................................................6
Part 3 Budget and Company Finance...............................................................................................7
3.1 Budget and purposes of preparing a budget.....................................................................7
3.2 Benefits of forming a limited company and listing it on stock exchange........................8
REFERENCES..............................................................................................................................10
Appendices.....................................................................................................................................11
Supporting Calculations.......................................................................................................11
Part 1 Business Performance Analysis............................................................................................3
1.1 Analysis of statement of Profit or Loss............................................................................3
1.2 Analysis of statement of Financial Position.....................................................................4
Part 2 Understanding Financial Information and cash management...............................................5
2.1 Concept of Accrual accounting versus cash accounting..................................................5
2.2 Difference between profit and cash flow..........................................................................6
Part 3 Budget and Company Finance...............................................................................................7
3.1 Budget and purposes of preparing a budget.....................................................................7
3.2 Benefits of forming a limited company and listing it on stock exchange........................8
REFERENCES..............................................................................................................................10
Appendices.....................................................................................................................................11
Supporting Calculations.......................................................................................................11
Part 1 Business Performance Analysis
1.1 Analysis of statement of Profit or Loss
The financial results or sales statement, because it is generally known, is among the
company's preliminary statements that communicate about its financial activities in a specific
timeframe (Chandra, 2017). This is a financial document summarising all of the profits and
expenditures of a corporation. This covers revenues from advertising and other revenues as well
as administrative costs, expense of that same products sold, various expenses resulting in the
organization's net revenue. Net profits can be correct or incorrect, i.e. the company can benefit
across both benefit and loss.
The business's descriptive financial statements has also been analysed to determine the
financial results of T shirts Ltd. but the first aspect which is examined at would be its revenue,
expenses as well as profitability. It is shown in the initial glance that perhaps the group posted a
decline from its sales between £ 2,101,000 during 2018 towards £ 1,366,000 during 2019, which
may be attributed to less interest leading to financial uncertainty. These have reduced the
purchase price from the previous year that has allowed it to record a smaller decline in total
revenue. Going ahead, it has reported a rise in operating costs, and while the spike would not
seem unusual, increasing revenue may be attributed to normal rises in administrative costs such
as publicity and advertising. In 2019, the organization reported a loss between tax and interest,
however in the preceding year was already in a successful condition. The group has reported a
rise in financial expenses by more than 1.5 percent, which indicates that this year the company,
is taking on additional debt with increased costs. The consequence is a massive negative during
2019 that was in 2018 at such a positive stage. With remaining earnings, this deficit may have
been changed. No detail mostly on dividend strategy of T Shirts Ltd was given. Diverse
accounting ratios were listed in the below order to provide a clearer quantitative overview of
financial results over 2 years:
Interest coverage ratio-It is a sovereign debt cum accounting package used only to
determine the willingness of the firm to meet its financial expenses from its profits (Greenbaum,
Thakor and Boot, 2019). The greater the number, the easier it is for industry. T shirt Ltd.
registered 3.71 times the potential to cover attention in 2019, although it became 6.39 times in
2018. The decline may be related to the enhanced cost of fund transfer lending that was missing
1.1 Analysis of statement of Profit or Loss
The financial results or sales statement, because it is generally known, is among the
company's preliminary statements that communicate about its financial activities in a specific
timeframe (Chandra, 2017). This is a financial document summarising all of the profits and
expenditures of a corporation. This covers revenues from advertising and other revenues as well
as administrative costs, expense of that same products sold, various expenses resulting in the
organization's net revenue. Net profits can be correct or incorrect, i.e. the company can benefit
across both benefit and loss.
The business's descriptive financial statements has also been analysed to determine the
financial results of T shirts Ltd. but the first aspect which is examined at would be its revenue,
expenses as well as profitability. It is shown in the initial glance that perhaps the group posted a
decline from its sales between £ 2,101,000 during 2018 towards £ 1,366,000 during 2019, which
may be attributed to less interest leading to financial uncertainty. These have reduced the
purchase price from the previous year that has allowed it to record a smaller decline in total
revenue. Going ahead, it has reported a rise in operating costs, and while the spike would not
seem unusual, increasing revenue may be attributed to normal rises in administrative costs such
as publicity and advertising. In 2019, the organization reported a loss between tax and interest,
however in the preceding year was already in a successful condition. The group has reported a
rise in financial expenses by more than 1.5 percent, which indicates that this year the company,
is taking on additional debt with increased costs. The consequence is a massive negative during
2019 that was in 2018 at such a positive stage. With remaining earnings, this deficit may have
been changed. No detail mostly on dividend strategy of T Shirts Ltd was given. Diverse
accounting ratios were listed in the below order to provide a clearer quantitative overview of
financial results over 2 years:
Interest coverage ratio-It is a sovereign debt cum accounting package used only to
determine the willingness of the firm to meet its financial expenses from its profits (Greenbaum,
Thakor and Boot, 2019). The greater the number, the easier it is for industry. T shirt Ltd.
registered 3.71 times the potential to cover attention in 2019, although it became 6.39 times in
2018. The decline may be related to the enhanced cost of fund transfer lending that was missing
in 2018 as well as the volume of loans that will have interest rates has also risen. And, this can
also never be forgotten because, as in 2018, the corporation would not have revenues to offset its
financial expenses in 2019.
Operating gross profit measure that is assesses the productivity of a business by paying
variable manufacturing expenses to produce profit on revenue. T shirt Ltd posted an operating
income margin of 21 percent in 2018, although due to reasons mentioned above, it has an
operational loss ratio of 29 percent in 2019.
1.2 Analysis of statement of Financial Position
Another final declaration by a company that represents a capital structure at a particular time
seems to be the financial report or cash flow statement, because it is generally known (Fazzini,
2018). This covers the accounting results of company properties, liabilities of the company of
investors in such a way as to compare assets with the other two. The net sales defined in the
declaration of profits forms component of the investment of the owners.
In order to examine the financial condition of T Shirts Ltd., its financial situation statement
was analysed. It could be seen in the first calculation that there is indeed a decline in the market
amount of money invested, which is supposedly due to depreciation. Owing to lower demand
and decreased revenue, the closing stock price has risen, which indicates that the business has an
idle stock level in its warehouses. It must improve its marketing steps, and it will quickly have
expired stock. It is confirmed that the company has eased its lending policies to draw more
buyers, reflected in the rise in prior year current liabilities. The unusual truth is that even the firm
registered no short - term liabilities reserves in 2019, which is not a positive indicator of the
company's current assets. The firm has announced the same equity capital for both years,
meaning that T shirts Ltd. have not released any additional equity in 2019. In 2018, the firm
announced an ending balance of £ 500 of remaining profits that had to be used to balance off the
whole year's losses. Hence the retained amount of profits this year has been zero. Long-term
loans however have risen since 2018, suggesting that in 2019 debt payments are being obtained.
Payment period too have grown, but it seems to be in the normal market path from looking only
at ratio of growth. Also it recorded using cash outflow in 2019 that is at a far higher pace than
mortgages, according to data given.
In order to get a clearer comparative overview of T Shirts Ltd's two-year financial situation,
the following financial ratios were determined:
also never be forgotten because, as in 2018, the corporation would not have revenues to offset its
financial expenses in 2019.
Operating gross profit measure that is assesses the productivity of a business by paying
variable manufacturing expenses to produce profit on revenue. T shirt Ltd posted an operating
income margin of 21 percent in 2018, although due to reasons mentioned above, it has an
operational loss ratio of 29 percent in 2019.
1.2 Analysis of statement of Financial Position
Another final declaration by a company that represents a capital structure at a particular time
seems to be the financial report or cash flow statement, because it is generally known (Fazzini,
2018). This covers the accounting results of company properties, liabilities of the company of
investors in such a way as to compare assets with the other two. The net sales defined in the
declaration of profits forms component of the investment of the owners.
In order to examine the financial condition of T Shirts Ltd., its financial situation statement
was analysed. It could be seen in the first calculation that there is indeed a decline in the market
amount of money invested, which is supposedly due to depreciation. Owing to lower demand
and decreased revenue, the closing stock price has risen, which indicates that the business has an
idle stock level in its warehouses. It must improve its marketing steps, and it will quickly have
expired stock. It is confirmed that the company has eased its lending policies to draw more
buyers, reflected in the rise in prior year current liabilities. The unusual truth is that even the firm
registered no short - term liabilities reserves in 2019, which is not a positive indicator of the
company's current assets. The firm has announced the same equity capital for both years,
meaning that T shirts Ltd. have not released any additional equity in 2019. In 2018, the firm
announced an ending balance of £ 500 of remaining profits that had to be used to balance off the
whole year's losses. Hence the retained amount of profits this year has been zero. Long-term
loans however have risen since 2018, suggesting that in 2019 debt payments are being obtained.
Payment period too have grown, but it seems to be in the normal market path from looking only
at ratio of growth. Also it recorded using cash outflow in 2019 that is at a far higher pace than
mortgages, according to data given.
In order to get a clearer comparative overview of T Shirts Ltd's two-year financial situation,
the following financial ratios were determined:
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