Introduction to Finance ( Distinction Criteria )

Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1...................................................................................................................................3
1. Calculations of financial ratios are as follows:.......................................................................3
2. Importance of financial statement analysis:............................................................................5
QUESTION 2...................................................................................................................................5
1. Opening statement of financial position at the start of July 2015:..........................................5
2. Computation of forecast cash budget for next 6 months.........................................................6
3. Explanation of additional expenditures:..................................................................................7
QUESTION 3...................................................................................................................................7
1. Calculation of break-even point..............................................................................................7
2. Calculation of Margin of safety for the year ended 2019 and 2020:......................................8
3.Discussion of the new strategy that has been formed by Jessica.............................................9
(a) calculation of payback period, Net present value and average rate of return:.......................9
Discuss the best method of appraisal technique........................................................................12
Critical Analysis of Investment Appraisal Techniques:............................................................12
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Finance is procedure of generating monetary funds or capital for the organisation through
which they are able to operate the business activity smoothly. Due to this the business
organisations can attain their predetermined targets which they set before starting their business
activity (Huang, Zhang and Ruan, 2019). There are various ways by the help of which the
organisation can generate finance like issue of shares, bonds, debenture. They can also generate
the monetary funds from financial institutions, angel investors, government grants, relatives &
friends, and some time from crowed funding as well. Finance is very important for the each and
every type of business organisation. It can be either profit as well as non profit. This report
includes some question related to the financial statements and financial ratios. The solution of
the all these question are going to be discussed in the below report.
QUESTION 1
1. Calculations of financial ratios are as follows:
Gross profit ratio:
Revenue – COGS / Revenue*100
3,495 – 2182 / 3495 * 100
37.57%
Interpretation:
Gross profit ratio indicates the efficiency of the organisation that how efficiently
organisations are using their resources and increase the gross margin so that the net profit can
increase. From the calculation of gross profit it can analysed the gross profit is not so and high
due to the net profit ratio can also get decrease as well. The higher gross profit ratio is favourable
situation for the organisation (Novak and Leslie, 2020).
Assets Usage:
Total sales / Average of total assets
= 3495 / [(3812 + 2503) / 2]
= 3495 / 3157.5
= 1.10
Interpretation: