Finance and Acounting

In: Business and Management

Submitted By motherhubbard
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Income Statement/Profit and Loss Account-

PART 1 – Based on a case study relating to book 3 Session 3 & 5

1 (a) Shows the overall actual income, verses costs of a business for a given period of time-:
1. The breakdown of expenses -indirect and direct.
2. Increases/decreases in specific areas.
3. Increases/decreases in income for a period of time.
4. The net profit of a business (N.B, this does not include the value of assets/chattels, just profitability).
5. Enables managers and shareholders to view the company’s performance during a set period of time. The cost/income ratio of business shows it’s profitability and efficiency. 6. Enables managers to determine possible cost savings/ income streams that could be exploited further.
7. Investors can determine if there is a viable investment opportunity or disclose a risk assessment.

8. Can be used in regulatory financial reporting such as, Inland Revenue for Tax purposes.

1 (b) Concerns relating to City Florists – loan application for £120.000 identified in Income Statement.

There is already a loan outstanding but this is a minor issue.
The marketing expenses have increased by 9.7% in 2011 but with limited results in the increase of sales- 0.88%

The cost income ratio is high in 2010 but even higher in 2011- Which could highlight a potential problem with the efficiency/profitability of the business-
The Net profit is down by 15% year on year.
Overall the costs have gone up by 1.63% but profit is only up by 0.87%

BALANCE SHEET

2 (a) A summary of assets, liabilities and value- What the company own and what it owes?

Assets- Cash, equipment, buildings, furniture + money due.

Liabilities- Debt, accounts payable, taxes, loans (payroll)
Your net figure- A- L= Net (equity)

Fixed assets-…...

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