Owners put in their money to make a profit this is why it is important for them to track the sum of money they may have made in an accounting period. Usually a supervisor’s standing is related with the success of the company. When a business is making money the amount of money a manager makes will usually increase and they may also get a promotion. Income statements are also used to check the revenues and expenses of the company which allows managers to reduce their unnecessary expenses to make more profit. These income statements are also useful for outside users such as investors, creditors and the government.
P5; The Trading Account; The trading account is an account that shows profits and losses for a business. There are three parts to the trading account, the first one is sales turnover and this is the money that is coming into the business by trading. The formula for sales turnover is quantity sold x the selling price. According to business alpha the sales turnover for this business is 3,057,000. The second component is the cost of sales which includes the costs directly linked to providing the trade.
Cash disbursements show where you must spend some of your money, such as on employee pay, raw materials purchases, and manufacturing overhead costs Financing shows expected payments and the repayments of the borrowed funds plus interest. (Kimmel, 2009, p. 353). If there is a cash deficiency during any period, the company will need to borrow funds. If there is cash excess during any budgeted period, funds borrowed in previous periods can be repaid or the excess funds can be invested. 2) Why is a Cash Budget so vital to a company?
This week we learned that companies are required to prepare a statement of cash flows because it gives a more accurate snapshot of the actual cash flow of a company. Financial statements give an overall picture of how much revenue a company is reporting, but high revenue does not guarantee that the company has the ability to pay its bills. The statement of cash flows is a tool designed to help external users make sound economic decisions about the company. The statement of cash flows is divided into three sections: 1) operating activities, 2) investing activities, and financing activities. The operating activities section analyzes the company's flow of cash as it relates to a net loss or net income.
There are three main categories for the Statement of Cash Flows. The first is the “Cash flows from operating activities”. This category includes the cash activities for the daily transactions of the company. This includes the revenues the company makes from its business and the expenses related to making this revenue (payments to creditors, utilities, salaries, etc.). Investing activities have to do with the company buying a major asset, such as land, large equipment, buildings, etc.
Week 2 Discussion Questions DQ#1: How do you define strategic planning? What are some differences between strategic and financial planning? What financial problems might an organization encounter when implementing a strategic plan? I believe strategic planning is the process, which takes place to set organizational goals to meet the expectations of the mission and direction of the organization. Strategic planning focuses on the long-term goals of an organization, therefore it differs from financial planning.
Investors find this information lucrative because the more expendable cash a company has the more likely they are to pay out in dividends for the stock holders.. Liquidity Ratios: Current assets are a business's total current assets divided by its total current liabilities. Total Current Asset / Total Current liabilities 1,971,000 / 116,290 16.949 = 16.9 Current Ratio- 16.9:1 or 17:1 (16.9 to 1 or 17 to
3. Comment on how the price/earnings ratio is influenced by the earnings per share forecasts. 4. What is the “Market Capitalization” for your company? 5.
The Four Financial Statements Merced Villalobos ACC/290 January 11, 2012 Eleazar Pando The Four Financial Statements There are four basic financial statements. The first statement is an income statement that shows the companies’ revenues and expenses. The second statement is a retained earnings statement that shows the amount and causes of changes of retained earnings in a given period of time. The third statement is a balance sheet that shows what the business owns and what it owes. The fourth is a cash flow statement that shows where the business got earnings in a period of time and where that money was used.
These four financial statements are interrelated and prepared in a certain sequence. The net income on the income statement is added to the beginning of the retained earnings statement, the retained earnings is reported on the balance sheet, the amount on the balance sheet is then reported on the statement of cash flows. The balance sheets report for a specific point in time, while income statement, retained earnings statement and statement of cash flows report for a specific period of time. Each statement identifies the company, the specific period of time, and the type of financial