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Corporate Accounting : BHP Limited

   

Added on  2021-02-19

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Corporate Accounting

Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................1(a) Examine the relative information content of income statement and cash flow statement.....1PART B............................................................................................................................................31. Statements of cash flow...........................................................................................................32. Financial strength of each company based on evidence presented in statement...................143. Evaluation of three company for lending purpose................................................................15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17

INTRODUCTIONCorporate accounting refers to the branch of accounting that deals with collection of vitalfinancial information, preparation of cash flow and final account that depict the actual position ofcompany within a financial year (Waniak-Michalak, Macuda and Krasodomskac, 2016). Thesedata are used by the manager of company, external stakeholder including competitor to make thebetter comparison and effective decision related to business. For the better understanding ofreport three company has been selected that is BHP Limited, Santos Limited as well as FuntasticLimited. These three companies basically prepare cash flow statement to determine thecompany's financial position. This report cover topics like cash flow and income statementinformation, sources of finance for the company and the item that affect the cash inflow. PART A(a) Examine the relative information content of income statement and cash flow statementIncome statement is an essential part of financial statement that helps to determine thefinancial position of company by estimating the profit and loss of company in order to makeeffective business decision. This statement includes revenue or expenses of company,administration expenses, gross as well as net profit. This helps the manager to take the businessdecision and enhances the overall profitability as well as productivity. Moreover, cash flowstatement which is a part of financial statement that includes cash inflow as well as outflow. Inaddition to it cash inflow means refer the income of an organisation which is generated fromthree sources and that is operating, investment as well as financial activity. On contrary, cashoutflow refers to the expenses of business that affect the profitability of business. Content of income statementIncome statement includes the income and expenses which helps to define the financialposition of business. In context to all three companies that is Santos limited, BHP, Funtasticmake the income statement that include various item. These items are defined below:Revenue: It refer to the overall income earned by the Funtastic, BHP as well as SantosLimited company within a financial year from the sales of goods to the intermediary or finalconsumer. Expenses: It refer to the overall expenditure incurred by Funtastic, BHP and SantosLimited company on purchasing the goods and services to run its business operation smoothly.1

Thus, company significantly makes effort to enhance its profit by decreasing the unnecessaryexpenses of company. Profit and Loss:EBITDA: EBITDA refer to Earning before interest and tax that include depreciation anddepict the actual cash flow of company like the amount earned after bearing up all theexpenditure. Thus, company make sure they left with enough cash so that they can attract theinvestor and can take the loan in order to expand its business wisely. Herein, Funtastic, BHP andSantos Limited makes effort to earn significant amount of profit by managing all its expensesand revenue wisely (Vladu, Amat and Cuzdriorean, 2017). EBT: EBT refer to the earning before interest and tax, it include all the operating incomeas well as expenses in order to determine the capacity of earning within business. Thus,Funtastic, BHP and Santos Limited obtain the viable income by managing the routine task ofbusiness significantly. Content of cash flow: Company prepares the cash flow for certain period of time thatmay be monthly, quarterly as well as on the annual basis. Other than balance sheet and incomestatement cash flow is prepare by Funtastic, BHP and Santos Limited that determine the inflowand outflow of cash. Thus, it contain various item defined below:Operating activity: It include the revenue which is generated from current asset andliability. Thus, the manager of Funtastic, BHP and Santos Limited companies obtain theinformation about day to day activities of business include the revenue and expenditure. Investing activity: Investing activity include long term asset or liability of Funtastic,BHP and Santos Limited company for which cash flow statement is prepared that helps to seekthe vital information regarding long term investment. Financing activity: Financing activity includes the composition of equity capital or thedebt of the company that helps to contribute in making significant business decision forFuntastic, BHP and Santos Limited company (Michelon and et.al., 2016.). Therefore, the preparation of income as well as cash flow statement are the essential p[artof organisation that helps the business to take decision related to expansion and profitability. Theabove mentioned company prepare these statement to gain the idea related to actual profitearning by company within stipulated time period. Thus, cash flow is one of the part of financial2

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