Managerial Accounting

Running head: MANAGERIAL ACCOUNTING
Managerial accounting
Name of the student
Name of the university
Author’s name:

1
MANAGERIAL ACCOUNTING
Table of Contents
Answer to part A........................................................................................................................2
Answer to part B........................................................................................................................4
References..................................................................................................................................6

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MANAGERIAL ACCOUNTING
Answer to part A.
The key financial statements that are required for the analysis are income statement,
cash flow statement and finally, the balance sheet.
As per the views of Kim, Kraft and Ryan (2013), the income statement provides idea
on the income or loss of the company. This helps in identifying the income at every level
such as EBIT has been recognized to identify the income after incurring operating expenses
and for identifying the income at the next stage where the interest and tax have been paid the
PAT has been identified. The cash flow statement helps the analysis to identify cash available
from cash inflow and cash out flow after a certain period. Lastly, the balance sheet helps in
identify the company’s current position in the market as from the balance sheet the idea of the
assets and liability can be identified.
The elements that are included in this financial statement has been mentioned below:
Income statement: This includes the revenue of the company followed by the cost of goods
sold. This allows to understand Alan’s business’s gross profit. The EBIT has been derived
from the inclusion of the operating income and exclusion of the operating expenses from the
company gross profit. This helps in identifying the operating income or operating loss.
Further,the operating profit subtracts the interest and tax from the EBIT so that the
company’s net profit or the PAT can be identified. In addition, the income statement includes
the value of EPS which shows the basic and diluted EPS (Turktas et al., 2013).
Cash flow statement: The cash flow statement includes the activities such as operating
activities, financing activities and investing activities. The operating activity includes the
operational activities that are undertaken by the company through buying and selling,
providing services. This focuses on the cash inflow and out flow from the company’s main
business activities(Call, Chen& Tong, 2013). Financing activity helps in identifying the