Business Diploma: Strength Analysis of George Hamilton's Balance Sheet

This report provides an analysis of the strengths found within George Hamilton's balance sheet. The analysis identifies the owner's equity composition, highlighting the contributed capital and net profit. It emphasizes the company's strong liquidity position, indicated by higher current assets compared to current liabilities and a healthy working capital. The report also points out the company's lower debt risk due to a favorable ratio of net profit and owner’s capital to loans. Further strengths include the ability to constantly write new assets and liabilities, reflecting the company's capacity to manage debts effectively. Overall, the balance sheet offers valuable insights for investors, aiding in the assessment of long-term profitability and financial stability, as well as identifying key liabilities and adjustable assets for cash flow management. Desklib provides access to similar solved assignments and past papers for students.

Business Diploma

Analysis of Balance Sheet –
Strength
– The balance sheet of George Hamilton represents that the owner’s equity
comprises of the contributed capital of $60,000 while the net profit of the
company stands $24,500 with the overall owner’s equity of $84,500.
– The balance sheet represents that the company has higher current assets in
comparison to the current liabilities.
– Considering the strength of the balance sheet the current liabilities of the
company is less than the current assets.
– The liquidity position of the business is strong as it has the sufficient amount of
fund for meeting its short term debt obligations.

ANALYSIS OF BALANCE SHEET – STRENGTH
• The working capital of the company also stood 5,500 reflecting the
ability of the firm in paying off its current liabilities with its current
assets.
• The working capital of George Hamilton reflects that the creditors
confidence regarding the liquidity of the company.
• Another strength of the company is that the company runs a lower risk
in terms of debts since the net profit and owner’s capital stands greater
than the loans.
• This business is not taking any undue advantage from its increased
profits which its financial leverage might introduce.

ANALYSIS OF BALANCE SHEET – STRENGTH
• THE BALANCE SHEET OF THE COMPANY REPRESENTS THAT THE IT CAN CONSTANTLY WRITE
THE NEW ASSETS THAT IT ACQUIRES OR THE NEW LIABILITIES THAT IT UNDERTAKES.
• THE STRENGTH OF ITS BALANCE SHEET IS THAT IT REPRESENTS THE LIABILITIES AND THE
NET WORTH AND EVEN REFLECTS THE ABILITY OF THE COMPANY TO PAY AND COLLECTS ITS
DEBTS OVER THE TIME.
• THE BALANCE SHEET OF THE COMPANY WOULD HELP THE INVESTORS IN UNDERSTANDING
THE LONG TERM PROFITABILITY AS WELL AS THE FINANCIAL OUTLOOK.
• THE BALANCE SHEET HELPS IN DETERMINING WHICH LIABILITIES ARE OF UTMOST LIABILITY
AND THOSE ASSETS THAT CAN BE ADJUSTED TO HELP IN RAISING CASH FLOW.

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