Analysis of Assets, Liabilities, Expenses, and Gains for Beauty Salons

This document provides a comprehensive financial analysis of a beauty salon. It outlines the key components of a business's financial health, including assets (such as hair dryers, conditioners, and capital), liabilities (like bank loans and mortgages), expenses (such as salaries and supplier payments), and gains (from sales). The assignment also addresses cash flow management, highlighting potential problems like high overhead expenses and slow-paying invoices. It suggests solutions such as cost-cutting measures and offering discounts for quicker payments. The document offers insights into financial planning and operational efficiency within the context of a beauty salon business.

TASK 5

Describe Assets, Liabilities, expenses or gains
Assets – It can be defined as an economical resource which is owned by an individual,
corporation or association with an expectation of gaining profitability in future from it. The
needed assets for starting a beauty salon are Hair dryer, conditioners, good amount of capital,
Dryers, nail polish racks, sanitation stations, pedicure and manicure chairs, Shampoo bowls,
experienced and knowledgeable employees etc.
Liabilities – These are defined as future sacrifices of economic benefits that has to be
paid by the individuals in future periods. In addition to this, it is an obligation of a firm or
corporation which are gained by them for setting up the new venture or managing their functions.
Example of liabilities are Bank loans, Mortgages, Bills payable etc.
Expenses- It consists of economic costs which is incurred by a firm for managing their
operations and gaining revenue in future. Organisations can take deductions in their tax liabilities
through these expenses. Common business expenses are payments of suppliers, wages or salaries
of employees, equipment maintenance etc.
Gain – It can be defined as increments in the value of assets of property. A gain is arised
when selling of assets or services are higher then the original purchase price. In addition to this,
it can be defined as the positive difference between sale and purchase price.
Measures for avoiding cash flow problems
There are some main problems of Cash flow along with solutions of avoiding them, are
given as under:
 High overhead expenses – These are those costs which are not added in purchasing of
products but in managing those products these expenses are incurred and can influence
the cash flow of new business in negative manner. For solving these problems, owners or
managers of firm should be audited their expenses and make cutting in it if they can.
 Slow paying invoices- these are the common problems of managing cash flow. As the
newly introduced business of beauty salon they have to offer 30 or 60 day payment to
their clients which is mostly higher in terms of time period and can influence the cash
flow in adverse manner. Therefore, for solving these problems management or owner can
provide discounts so that payment can be received in quick manner.