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Solved Assignment on Finance (PDF)

   

Added on  2021-06-17

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RUNNING HEAD: FINANCEFinance

FinanceTask 1a)Balance sheetIt is also known as statement of financial position that reflects the true and fair view of a company’s financial position in the market. It is a statement that shows the balances of the assets, liabilities and capital of a business reported at the end of a fiscal year. Balance sheet reflects the capital structure of the firm and provides an idea about the company’s equity and debt financing.1 The fundamental equation of a balance sheet is:Assets = Liabilities + EquityThe statement is prepared at the end of every fiscal year along with other financial statements. It is used by investors, shareholders, creditors and many other users to critically evaluate the financial position of a company.b)Financial reporting Generally, following information is included while preparing financial reports of an organization:The financial statements that include cash flow statement, Profit and loss account, statement of financial position and changes in equity. .Notes to above financial statements are been disclosed in the financial report along with the presentation of such accounts.Media releases and announcements related to quarterly earnings.Quarterly and annual reports provided to shareholdersProspectus related to the issuance of public offering.Analysis and discussion done by management2All the above information are contained in a company’s financial report prepared by the auditors and related expertise individual. c)Difference between profit and cash flow 1 Thomas R Ittelson, Financial statements: A step-by-step guide to understanding and creating financial reports (Red Wheel/Weiser 2009). 2Charles H Gibson, Financial reporting and analysis (13thedn, South-Western Cengage Learning, 2011). 2

FinanceProfit is the excess amount of income over the expenses. It is basically the amount calculated by subtracting all the expenditure from the total income earned during a fiscal year. In other words, it is a financial gain or benefit derived when the total revenue exceeds the expenses, costs and taxes paid during the year.Cash flow is the inflow and outflow of the cash in the business. It is generated from the three activities named as operating, financing and investing activities. It reflects the solvency and liquidity of the firm and shows the manner in which the cash is been utilized in the business.3However, both the terms are different from each other in many ways. A company can have shortage of cash even after having large profits. The situation can be vice versa. ProfitCash flowThe income made from selling goods andservices. In and out flow of cash in the business.Gain derived after all the expenses are beenpaid out from the revenue.Derived by adding the cash used orgenerated from the three activities. The amount reflects the profitability offirm.Liquidity and solvency position isdetermined. A difference between total revenue andexpenditure made during the year. Flow of cash in operating, financing andinvesting activities.d)Maintenance of daily financial recordsIt is very important for the companies to maintain their daily financial records in order to run a successful business and gain a strong position in the market. Following are the reasons for maintaining daily financial records:The records or reports help in knowing the financial situation of the business. By looking at them or analysing them, one can clearly identify that whether the business is making money or losing it. It tells about the position of cash in the business used for paying the short term financial obligations. They help in establishing control over the business activities. Adequate inventory level can be set and the credit offer provided by the supplier can be checked with helpof the accounting or financial records. 3 John A Tracy, Accounting for dummies (John Wiley & Sons, 2016). 3

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