FINANCE ASSIGNMENT

Finance Assignment



Finance Assignment

List the key components in a set of company accounts.

The key components of company accounts include the financial statements of the company.

Balance Sheet

Income Statement

Cash Flow Statement

Statement of Changes in Equity

Notes to Financial Statements

What does a 'clean' audit report mean?

A clean audit report means that all the financial statements reflect the financial performance of the organization in the purest form. It is an audit report that reflects the true financial position of an organization.

What is contained in the income statement?

An income statement is an important financial statement that provides a lot of information for the management. It contains the organization's ability or inability of generating income on the long-run. It reflects various aspects of the organizational performance.

What is shown in the statement of changes in equity?

A statement of changes in equity demonstrates all the changes in shareholder's equity over the accounting period. It is one of the five financial statements prepared by every organization.

What is shown in a balance sheet?

Balance sheet portrays the position of an organization on a specific date. It summarizes all the resources employed by the organization under the head of “assets”. It also provides information regarding the owing of the organization and the total investments by the owners.

What is shown in a cash flow statement?

The cash flow statement contains all valuable information regarding the flow of cash throughout the year. All the purchases, sales and other transactions involving cash are portrayed in the cash flow statement.

What are the four types of organizations that might prepare accounts?

The four types of organizations that might prepare accounts are as follows:

Sole proprietorship

Partnership

Joint stock company

Cooperative society

Make written comment on the company's liquidity, capital structure, profitability and working capital management.

Profitability

The gross margin was 40% in 2005, which has declined to about 35% in 2006. ROCE has reached 44.61% from 17.5% in 2004 despite the fact that the gross margin had declined. This shows that the profit percentage is much better in comparison to the gross margin percentage. From 2.5 times in 2004, asset utilization ratio has increased to 4.61 times. The net profit margin has risen to 9.66% in 2006 compared to only 7% in 2004. This shows that even though the gross margin percentage is on the decline, the operational activities of the organization are functioning at immense efficiency causing the profit percentage to rise.

Liquidity

The current ratio is over 3 and very stable in the year 2006. The liquid ratio is also above 1.5:1 portraying that the organization has the ability to settle its debt from the liquid assets.

Working Capital Management

The stock turnover period has declined portraying a speeded process of purchase and sales. The stock turnover period in 2004 was 73 days, which has declined to only 47 days in 2006. The debtor collector period has decreased from 29 days in 2004 to only 23 days in 2006. However, the credit payment period has also decreased from 31 days in 2005 to 25 days in 2006. The overall impact on cash cycle was an increase from ...