Professional Documents
Culture Documents
Funding is the driving force behind every profitable projects. Businesses need capital to fund
these endeavors, which generate income. However, not all companies have instant access to
the money. The abundance of funding options makes it easier for employers to determine the
type of financing that best suits their needs.
Bank Loan
Banks and credit unions provide loans to companies large and small. When companies get a
loan from a Bank, they have access to a specific amount of money, but are bound by the terms
of payment of bank interest rates. Interest is the fee for borrowing money for the Bank, which
builds up based on the amount of the loan is used and how long the business repay the money.
HOME EQUITY LINE OF C REDIT
If the employer also owns a home, that home equity line of credit. Home equity lines of credit
are financial institutions loans give homeowners based on the amount of equity they have in
their home, and the value of their home and the mortgage current. Once applicants are
approved for home equity lines of credit, they have immediate access to funds. Beware of the
volatility of interest rates, as published August 2009 by the Federal Reserve that interest rates
on home equity lines of credit are usually variable. Sets a variable interest rate based on the
index value. As such, this type of loan requires employers to monitor closely the rate of interest.
FIND AN INVESTOR
Groups of investors or private investors look for companies that need financial assistance. The
main types of venture capitalists and angel investors. Capitalists invest money widely, with an
average investment of $ 500,000 to $ 10 million, according to an article in the magazine, "top
100 venture capital firms". Angel investors provide smaller amounts which remain significant.
Corporate investors supply capital for fractional ownership in the company. Instead of charging
interest on the amount of money loaned to businesses, investors want a share of the profits.
YOUR OWN MONEY
If employers have a savings or retirement accounts, they can benefit from another source of
funding, known as the "bootstrapping", when the employer uses personal resources to finance
business endeavours. Personal resources are the main source of financing for new
entrepreneurs most, she says, "small business administration". This also includes the use of
personal credit cards. However, credit cards have high interest rates, so it is better to use credit
cards for short-term investments that will pay off quickly.
Retained income
Sale of supply
Owners investment
It may be in the form of start up wealth - used when the business is location up
Advantages
No concentration is payable
Disadvantages
Retained Profits
This source of economics is only available for a business which has been trade for more
than one year
It is when the returns made are plough back into the business
Advantages
No interest is owed
Disadvantages
Sale of Stock
It is when the income made are plough back into the business
Advantages
By selling off stock it reduce the costs associated with investment them
Disadvantages
This money comes in from export off fixed assets, such as:
Businesses do not always have remaining fixed assets which they can sell off
There is also a maximum value to the numeral of fixed assets a firm can sell off
Advantages
Disadvantages
Debt Collection
A business can raise finance by collect the money owed to them (debts) from their
debtors
Not all businesses have debtors ie those who agreement only in cash
Advantages
No additional cost in success this finance, it is part of the businesses regular operations
Disadvantages
There is a risk that debts remaining can go bad and not be repaid
External Sources
Additional Partners
Share Issue
Leasing
Hire Purchase
Mortgage
Trade Credit
Government Grants
Bank Loan
This is money on loan at an agreed rate of interest over a set period of time
Set repayments are spread over a time of time which is good for budgeting
Disadvantages
This resources they can still write cheques, even if they do not have an adequate
amount of money in the account
This is a good way to swathe the period between money going out of and coming into a
commerce
Disadvantages
No concentration is payable
Disadvantages
No interest is to be paid
Disadvantages
Leasing
This technique allows a business to obtain assets without the need to pay a large lump
sum up frontage
Payments are multiply over a period of time which is good for budget
Disadvantages
Can be high-priced
This process allows a business to obtain assets without the need to pay a large lump
sum up obverse
Involves paying an initial set down and regular overheads for a set period of time
The main difference between hire obtain and leasing is that with hire purchase after all
repayments have been made the business owns the positive feature
Once all repayments are made the business will own the advantage
Disadvantages
The business will own the material goods once the final payment has been made
Payments are multiply over a period of time which is good for budget
Once all repayments are made the business will own the positive feature
Disadvantages
If business does not keep up with repayments the belongings could be repossessed
Trade Credit
Business can sell the goods first and pay for them later on
Businesses need to with awareness manage their cash flow to guarantee they will have
money available when the debt is due to be compensated
Government Grants
Usually certain surroundings apply, such as where the business has to locate
Advantages
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of good assets, security has increased borrowing is not an option. Business risks. Business risk
indicates volatility in operating profit. You should avoid companies with operating profits are
highly volatile high levels of borrowing, they may find themselves in the position of operating
profit falls and that it could not meet the interest Bill. High-risk projects funded usually stock, as
there is no legal obligation to return equal pay.
Operating leverage. The Guide refers to the company's operating costs that are fixed rather
than variable. High proportion of fixed costs of operating gears. Companies with high operating
gears tend to have operating profits are volatile. This is because fixed costs remain the same,
regardless of sales volume. Thus, if the increase in sales, operating profit increases by the
largest. But if sales volume, operating profit fell by a greater proportion. Generally, it's a very
dangerous policy combination of highly leveraged finance with high operational gearing. High
operating leverage is common in many service industries, where many are fixed operating
costs.
Monitoring the vote. Issue of shares to new investors could change the voting control of the
business. If the founding owners holding more than 50% of the capital may be interested in
selling new shares to investors outside the control of the vote in the General Assembly might be
lost. The current state of the equity markets. The Hang Seng manikombanis prices will be
reluctant to sell new shares. They feel risividoil prices are very low. This would reduce the
wealth of the owners. Note thisdos does not apply to rights issues that sold shares to existing
owners. New issues of shares on stock markets in the United Kingdom has binrari over the last
few years due to the bear market. At the time of weritingthiri is some evidence that the bear
market is about to end. After considering the points mentioned above, the company will be able
to decide between using the DIN or stock. Another important resolution should use any type of
financing, and so should be considered.
Equity Finance
A detailed consideration of the different sources of evenhandedness venture is beyond the
scope of this piece and students are not obligatory to consult their textbooks or Manuals for
more comprehensive coverage. However, here are a few general points on the subject:
For companies who have already contributed in the question of rights, mandatory under
company law matters. This means that any new shares to existing shareholders commensurate
with existing stockpiles. This is to protect the existing shareholders of the company selling
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shares to new investors at a low price, diluting the wealth of existing shareholders. This
condition can be overcome if existing shareholders prepared to vote on the ' waiver of preemption rights.
The current situation of the company. Companies listed on the London Stock Exchange
securities "or" alternative investment market (aim), a new stock can be raised by selling new
shares in these markets through issues, offers for sale or development. Other companies who
lack the stock more difficult raising stock, you may need to resort to venture capitalists if they
require equity financing for long-term investments. Fixed borrowing rate float v many lenders
offer borrower choosing between a fixed interest rate and one floating (no changes) with the
General level of interest rates. Fixed rate borrowing may attract certainty (you know what is the
interest rate that you are going to pay) but on average it is more expensive. This is because
lenders see themselves as taking more risk on fixed rate lending as they may lose in the case of
an increase in interest rates. Generally, floating (variable) rate of borrowing cheaper.
Conclusion
It is not possible to recommend ideal source of funding for any project. What is important is that
students appreciate the advantages and disadvantages of the various methods of funding, and
can provide advice for companies.
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Owners fund
Dividends: example b Mr owns 100 shares in ICI, the company will pay a lot pence per share
twice a year. If pushed ICI up 20 p per share in March and September, the cost of a business
return Mr 100 x 0.20 2 = 40 return sector (b):-instead of paying cash dividends, the
company can pay them in the form of new shares. This is called the dividend yield stripe: (for
example, instead of paying the 20 profit ICI had made Mr alternative of 2 new shares in ICI
plus 4 pounds in cash (the advantage that company reserves much more cash for use in
business
Bank loan
Interests that is floating (fixed or variable) usually the bank rate often dictated by Government
policy and premium Bank makes a profit, if you take a loan of 100,000, and 10% interest, cost
10,000 a year and other major cost: first-order fee to cover the cost of the lenders (to prepare
the data on the computer, checking references) a charge, interest for the debt is outstanding
financial and non-financial costs:-Providing regular information to the lender for the sole traders
and business partners are required to put up personal property as security-and so the pressure
myself and damaging effects on personal life and relationships
Opportunity cost
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This circumstance where instead of a company paying interest of 10,000 per year, and the
company could do something else with the 10,000 income generation more for example, if
the company can spend 10,000 a year in additional advertising, this could generate 15,000
extra for profit Taking out the loan and interest payment mean that wasted an opportunity to
earn an extra 15,000 the opportunity cost the 15,000
Government grant
The costs include administrative costs of application fill out forms on a regular basis underline
the power of that business is still eligible to receive funds (revenues:-companies pay taxes on
income (profits is the cost of retained earnings, and the cost of capital (such as retained
earnings capital not needed immediately and reinvested in short will be some costs
overdraft
Costs: Often Interests, fees and higher fees May loan when the maximum is exceeded
insurance business assets May Require good credit score
Factoring
Costs: Possible harm to customers Company image distortion May impose restrictions on
the way in which you do business Reduction in mobile phones
Leasing
Costs:
Fixed interest payable Cost of leasing than purchase costs of Maintenance requirement
depending on the type of agreement Credit history check
Trade credit
Costs:
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Sued terms Credit worth Cost and penalty if the default Can in case of non-payment
Financial planning
Definition:
Financial planning involves the analysis of financial flows of the company. that includes
predicting the consequences of investment decisions and the financing and the distribution of
profits and weighting effects of different alternatives: Van Horn You've got to be careful if you
don't know where you're going, because you might not get there. Quote from Yogi Berra
15
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Uses of Proforma
- used by existing and forthcoming lenders
-enables grounding of Pro forma Cash flow
Statement
-adjustment in deliberate operation, credit policy etc.,
- Weaknesses
-Past vs. Future
- Variables are mandatory to take Desired
Values
Class Task
You are granted a 50,000 (fifty thousand pounds) to start a small business as you wish. What
will you do with this money, and what should be done To small groups (15-20 minutes)
Helps people plan Financial: live within their income brought allocate priorities financial
meeting expenses meet financial emergencies and reduce credit use reduce uncertainty and
conflict over finances gain a sense of independence and control save and invest to reach
financial goals
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(Occurs when a business tries to do too much with too little long-term capital (may encounter
problems in debt maturity (also visible in the business, and when there is a rapid increase in the
rate of rotation (rapid increase in current assets, fixed assets may be
Overtrading-signs
(The rate at which turned into cash stock and debtors are slow (increase in stocks and debt is
greater than the rate of increase in sales (may is likely to lengthen the repayment period for
creditors (exceeding overdraft limit agreed by the Bank.
Reference
http://www.citehr.com/116640-financial-planning.html
Introduction
Different party in organization
require different in turn
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Types of decisions
Strategic conclusion: long-term, on the surface focussed, not
detailed & undertake by top level administration
Tactical pronouncement: short-term, more detailed. Internal
focussed & undertake by middle supervision
Operational decision: day to day decision, on the inside
focussed, for shop floor operation, impacts unswervingly on
customers
Types of stakeholders
Owners
Shareholders
Managers
Staff or employees
Customers
Suppliers
Community
Government
I= Internal
E= External
Stakeholders
(Shareholders/owners;-(classified as internal party (interested in profitability (profit attributable to
shareholders (asset base (NET/Organization (the availability of cash for future expansions
Managers
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Bankers/Lenders
(Interested in the following information (the liquidity of the company (profit (coverage of benefits
(the ability to pay interest and loan (fixed asset base (leveraged company (wanting budget
information and cash flow
Suppliers
Firms get the resources they need to produce goods and services from suppliers Businesses
should have effective relationships with its suppliers in order to get quality affordable resources
this two-way process, suppliers depend on companies that supply Interested in cash flow for
business Interested in ability to meet payment obligations in due time
Customers
Customers purchase goods or services produced by the companies They may be individuals
or other companies, Firms must understand and meet the needs of their customers, they will
fail to make a profit, in fact, survive interested in the quality of the product/service information
Community
Firms and societies that existed in the local bilateral relationship has been the community
often provide many company employees and clients often supply business the goods and vital
services to local area But sometimes can feel aggrieved by some community aspects of
company interested in Support organizational moral commitment to the environment and
corporate social responsibility
Government
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Financial statements
Financial statements are fashioned
as:
conformity to the law, companies
Act 1985
To let somebody know stakeholders about its
Operations
To help administration in decision
making
Made up of:Balance sheet
Profit & hammering account
Balance sheet
A snap shot of an entitys economic
position at a unambiguous date
Matches material goods owned and used by
an individual (incl cash)
Against investments applied to secure
the belongings (all debts + equity)
Assets =equity + liabilities
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BALANACE
CASH FLOW
FINANCE
SHEET
ACCOUNT
STSTEMENT
Money
Increase the
May increase
borrowed from
current asset in
cash
families &
available
friends
Shown as short
term liability
Bank loan
Affect current
Affect P&L
Affect
asset-cash &
expenses
available
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long-term
(interest)
liability in
cash
(increase)
b/sheet
Sales of fixed
Affect fixed
Affect revenue in
Increase
assets
asset value in
P& L (Sales
available
b/sheet
income)-profit
cash
(reduce)-
may be affected
increase cash
(current asset)
Sale of stocks
Affect current
Affect sales
Affect
asset in
revenue &
available cash
balance
profit or loss
in cash flow
N/A
Affect available
sheetreduces stock
value and
increase cash
Additional
Affect equity
capital from
new partners
asset (cash)
Debt collection
Affect liability
on b/sheet
revenue acct-if
flow statement
(reduce)-
source from
increase current
sales
cash
asset value
(cash)
Sale of new
Affect equity
May affect
shares
account &
available cash
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Sources of
Balance sheet
finance
Trade credit
Affect creditors
Cash flow
A/c
Statement
N/A
N/A
N/A
Increase
a/c in balance
sheet (increase)
and increase
current asset
(stock)
Retained
Affect equity
earning
account
available cash
(increase
in cash flow
reserve) and
affect current
asset (cash)
Government
Increase current
grant
asset (cash)
N/A
Affect available
cash in cash
flow
Reference
non-Accounting students, Prentice Hall
Atrill & McLaney (2004) Accounting
and Finance for non-Specialists, Prentice
Hall
BPP, Managing Financial Resources, Core Unit 2
www.bized.co.uk
24
Personal savings
When personal savings are made for business loans. You will see the amount lent as long-term
liabilities on the balance sheet. If any interest payments that will be recorded in the profit and
loss account and deducted from the profits.
Sale of assets
The sale of assets will reduce the value of the fixed asset in the balance sheet. The profit or loss
will be recorded on the sale of assets in the profit and loss account for the year. Asset
depreciation will be removed along with the original value of the balance sheet.
Ordinary shares and preference shares
Issue of ordinary shares and preference shares increase vale capital on the balance sheet. If
the market price of the issued shares of the nominal value of the share and also is increasing
the share of premium in the balance sheet. Is also showing the number of shares issued in the
public budget, and preference shares, shows the rate of return. And dividends paid to
shareholders after tax appropriation of net profit.
Venture capital
This is the amount of money invested in the business as capital, and so comes under capital in
the balance sheet. Back to venture capitalists is a payout that is registered in the account.
Factoring and invoice discounting
This does not appear on the balance sheet. However you can show funds from factoring and
invoice discounting high cash balances. Interest charges and fees are recorded in the profit and
loss account.
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Reference
a. Sources-of-Finance
Types Of Budgets
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Fixed budget
1000 learners
40 learners
200 each
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20 per hour
32 hours
20,000
16,000
200,000
64,000
36,000
300,000
300
25 tutors
64,000
28
1000 learners
40 learners
200 each
20 per hour
32 hours
20,000
16,000
1000
2000
200,000
400,000
Direct labour
64,000
128,000
overheads
36,000
36,000
300,000
564,000
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300
282,000
Summary
budgets may be describe as revolutionary plans
Practice Question
Each product consumes materials worth
50.00
10 per hour
32 hours
30
4 weeks
26,850
Types of budget
Cash vs Zero-based
cash budgets reproduce cash movements only
1. truthful forecasting
2. Based on organisational aim
3. in sequence is timely and accurate
4. fashioned with multilevel input
5. standard reviews are built-in
People in charge of budget are held responsible in areas where they have no
responsibility
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Uses of budget
For forecasting
To entrust
Reference
Atrill & McLaney (2004) Accounting and Finance for non-Specialists, Prentice Hall
www.bized.co.uk
http://en.wikipedia.org/wiki/budgeting
en.wikipedia.org/wiki/zero_based_budgetting
http://en.wikipedia.org/wiki/personal_budget
3.2 explain the calculation of unit costs and make pricing decisions using relevant
information.
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Diagram-fixed cost
33
Cost-plus pricing- company adds a certain entitlement on the cost of producing its
product to set the business price
Skimming method- makes a high profit at the onset to cover investigate cost offering
reduced numbers. Used by electronic commodities and other tech product e.g. Apple ipads and i-phones
Penetration pricing: offering low prices in order to gain so many clients at the
commencement. The aim is on wider acceptance and increase souk share and
competiveness. This is a very good entry approach where competition is high and
intense
Target pricing: used for intended or unambiguous purpose e.g. to enable a singleminded rate of homecoming on investment for a scrupulous period of time- used by
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companies whose capital speculation is high e.g. energy companies or sports car
companies
Reference
Atrill, P (2009) Management Accounting for Decision Makers 6th Edn. Prentice Hall
www.globusz.com/ebooks/costing/00000010.htm
http://en.wikipedia.org/wiki/cost-centre
http://en.wikipedia.org/wiki/operating-cost
www.bized.co.uk
A means of assessing whether a worthwhile investment project or project Investment can not
be buying a new PC for a small company, a new piece of equipment in the manufacturing plant,
and a completely new factory, Used etc in both the public and private sector
Types of investment
appraisal
Accounting period Payback rate of return (ARR) rate of return (IRR) Internal NET
Profitability indicator "present value (discounted cash flow)
Investment appraisal
I do a investment companies? The Importance of remembering as a purchasing capacity do
not buy stocks, bonds or investment bank! Buy equipment/machinery or building a new plant
for: Increase capacity (quantity that can be produced) which means: Demand can be
achieved and this generates sales revenue Increased efficiency and productivity Investment
therefore assumes that investment will produce future revenue streams to assess Investment
is all about evaluating these streams of revenue against costs Not investing science! The
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payment method generates the length of time it takes to pay off the initial capital cost
information Requires to return investments 600,000 It cost machine produces elements that
yield a profit of 5 each to produce 60,000 units per year will be Payback period 2 years
Payback could occur during Can generally take into account the reduced cash flows from
investment to days
Why do companies invest?
Importance of remembering
investment as the purchase of
productive capacity NOT buying
stocks and shares or investing in a
bank!
Buy equipment/machinery or build
new plant to:
Increase capacity (amount that can
be produced) which means:
Demand can be met and this generates sales revenue
Increased efficiency and productivity
Investment therefore assumes that the investment will
yield future income streams
Investment appraisal is all about assessing these
income streams against the cost of the investment
Not a precise science!
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255, 000
YEAR 2
255, 000
YEAR 3
255, 000
An investment e.g. is expected to result in cash outflows of 10,000 a year for the next five
years the initial cost of investment profit Total 20,000 and 30,000 annual profit: = 30000
pounds/5 = 6000 ARR = 6000/20000 100 = 30% A return worthwhile? Net present value
NPV Takes into account the fact that money values change with time How much will you
need to invest today earn x amount of time? Value of money affected by interest rates NPV
helps to take these factors into account returns shows you what is your investment would earn
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in alternative investment e.g-project 150,000 costs After 5 years cash = 100,000 (10%)
If you had invested 1 million to the Bank offers interest of 12% will be the largest returns might
be better off to reconsider your investment! The principle: How much you will have to invest
now earn 100 in one year if the interest rate is 5%?
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Profitability index
Allows comparison of the costs and benefits of different evaluation projects and thus allow the
decision-making be undertaken "net present value" index =-profitability-considerations Key
"investment cost of initial capital" for companies looking to use: Ease of use/simplicity required
Degree Extent of precision required which could be future cash flows accurately measure
Extent of future interest rate movements that could be taken into account, he predicted
factoring in inflation raised the Necessity of making Investment long-term decisions requires
special attention because of the following reasons:-Effect They finance the steady growth in
the long term They affect risk It firm involves the commitment of considerable amount of
investment decisions They are irreversible, and in large loss They are among the toughest
decision to make benefits Future need detailed evaluation because they are difficult to predict.
Simple to use and gives an overview on how long it will take to recover the investment May
be useful where a relatively short time scale Help determine how fast the cash flow has
become positively Useful project where companies cash flow problems: defects Can give a
simplistic mode Does not take into account the fact that future returns may be less than the
value of the ignore the qualitative aspect of resolution Does defects recovery period does not
look at how many are created after the rear Does not look The profitability of the project and
compare the return with the initial investment
Take no account of interest rate
ACCOUNTING RATE OF RETURN:
ADVANTAGES
Shows the profitability of investment clearly use Take into account the interest rate factor
Can compare alternative draft show differences in return-ARR defects Does not take into
account that future returns may be less than the value of Ignore does not consider the
qualitative aspect of resolution Does how long it takes to recover the initial investment shows a
net present value/DCF-advantages of profitable investment clear Take into account the
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interest rate Allows a return in the future could be less than the value of defects: Ignore quality
do not consider side Does how long it takes to recover the initial cost of investment
Reference
BPP, Managing financial resources, core unit 2
http://www.financial.kaplan.co.uk/Document/ICEAWMI_c
h3_p.pdf
www.businessstudiesonline.co.uk
www.revisionworld.co.uk/files/investment
The financial statements include the four key small business income statement, balance sheet,
cash flow statement, statement of owner's equity. Private businesses and small businesses do
not need to prepare financial statements. However, if they want to go or need financing, a set of
financial statements will come in handy. Data that help small business owners collect their
financial records, and compare current performance against prior periods and the industry
average. The income statement is the basic components of the income statement revenue,
expenses, and profits. Usually appears in the top line revenues and bottom line shows the net
profit or loss. Companies incur losses if expenditures exceed revenues. The size and
complexity of the company determines the number of items in the income statement, but the
main categories that include sales and operating costs and non-operating expenses. Gross
profit equals Sales minus cost of goods.
Balance Sheet
The components of the balance sheet of assets and liabilities and owner's equity. Asset is
displayed on the left side while the other two appear on the right side. The basic accounting
equation States that assets must equal total liabilities and owner's equity. Assets include current
assets such as cash, inventory, fixed assets, such as plants and other properties. Include
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liabilities short-term liabilities, including liabilities accounts payable, long-term, such as bonds. A
small business may not have any long-term debt. Equity section of the balance sheet holders
may contain only the ending balance for the period because it shows the ending balance in the
account statement of owner's equity.
Reference
Dun & Bradstreet Credibility Corp.; Financial Statements for Small Businesses; Tim Devaney,
et al.
San Joaquin Delta College Small Business Development Center: Get a Handle on Your
Business Finances
University of Arkansas at Little Rock, Arkansas Small Business and Technology Development
Center: Understanding Financial Statements: What Do They Say About Your Business?
4.2
There are three types of financial statements: income statement, balance sheet and cash flow
statement. Each of these financial statements show a different aspect of the business. However,
correctly understand the financial health of the business, all the three financial statements
should be studied together. Each financial statement can show potential problems or
weaknesses that are evident in other data. There are standard forms that are used for each of
the three financial statements.
The basic form of the statement of income on income first, followed by the expenses. Expenses
are subtracted from revenue to calculate the net income of the business. This is a statement of
income used by most service providers and others that did not cost of goods sold for the
services they use to create simplified profit more. If there is a cost of goods sold, income
statement, statement of participation.
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Income statement-shop retail or manufacturing process is very different from the statement of
service. In the income statement, the first line of gross income or revenue, followed by
subtracting the cost of goods sold or manufactured. This provides the amount of gross income.
The second section of the income statement lists all expenditures associated with SG & amp; A,
parts sales and General and administrative business. This is subtracted from the gross income
reveal operating income. The last section presents expenditure and interest expense and taxes
to net income from other businesses.
BALANCE SHEET
The balance sheet shows the assets, liabilities and shareholders ' equity & # 039;. Total assets
must equal total total liabilities and shareholders equity & # 039;. Section I of the balance sheet
lists all the assets. This includes cash, investments, real estate and other commercial
equipment and stores. The following section lists the liabilities, or what the company owes to
others. This includes any loans or accounts payable. The last part of the shareholders & # 039;
equity is the difference between total assets and total liabilities.
Reference
4.3 interpret financial statements using appropriate ratios and comparisons, both internal and
external.
"In spite of constraints analysis is widely used as a tool to assess past performance and predict
future successes or failures of entrepreneurs."
numbers of balance sheet and income statement and statement of cash flows and compare.
Ratios compare the facts against previous years, industry, other companies, or even the
economy generally. Consideration of the relationship between the values of rates and contact
them to find out how the company's past and future. Themes and trends the chronology of these
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ratios can be used to make conclusions about the financial position of the company and its
operations, as well as attractive to investment. Financial ratios are calculated from one or more
pieces of information in the financial statements of the company. Investigate thoroughly the
financial position of the business, and can help decide whether.
1) as they collect data from the published accounts of foreign companies) the confidentiality and
accuracy of scanning for comparisons between companies. Users analysis are not only senior
management and all levels of management are "financial ratios. It depends on the company and
the use, factors that depend on company size and nature of the company. However, the
Department always requires an analysis of previous data for the company and its performance
in order to maximize profit and loss prevention. Due to the Administration to decide on a daily
basis and therefore it was not satisfied with the analysis of yearly or quarterly. It requires up-todate and useful financial information to make decisions on a daily basis. Given the financial
information requested and used at all levels, can decide what information is relevant to each
level and filter and flow of financial information.
You can also use financial ratios assess the risk factor to investors, predicting bankruptcy.
Liquidity ratio used non-bank credit to companies undergoing a difficult time. Is used for nonbank company where the company could not get more loans from the banks. This is supposed
to be a greater risk as if the company cannot repay the loan to the Bank, and maybe they will
charge higher interest. Interest payments are subject to initial profits for the company (as some
financial analysts), where you must calculate interest as a percentage of sales from that
company, or alternatively the total costs as a percentage of the profits of the previous year. The
analysis of these ratios affect decision makes investing in any company. Now let's talk about
the use of hierarchy in companies.
Public administration with the task of significantly close to the production manager. Its role in
predicting and anticipating future company is important because it compared rates this year
than in the previous year and see whether it has been increased public expenditure. Now you
can not only be general expenses raw materials etc. can occur.But also from the perspective of
technological devices. Explains the Tamari (1978) reduce costs if companies give large output
proved to be beneficial to the company's performance. Executive management is requiring
nearly all the collected information to financial analysis. They have to keep an eye on everything
from what the production manager to get shareholders. They get information from previous
years for the company as well as the comparison between companies similar to theirs.
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