TMA 03

TMA 03

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TMA 03

An income statement reveals you both the income and the expenses of an organization. It allows you to evaluate whether the organization is investing too much on particular expenses, and to see whether they are turning revenue for whatever the time frame of the income statement was (month, year, quarter). Usually you would also want to see a balance sheet to figure out whether there are any financial obligations or resources that are not noticeable on the income statement, as well as to see the present bank balances/loan balances/credit card account balances. Experts, investors, stockholders, prospective investors and loan companies use these reviews to be able to evaluate the financial health of a business. The value of this review and the capability to perfectly study and evaluate the information is important to an accountant. To a serious investor, income statement analysis shows much more than an organization's income. It provides important ideas into how effectively management is managing costs, the interest rate, expenditures, and the taxation paid. Investors can use income statement analysis to determine financial ratios that will expose the rate of return the business is earning on the shareholders' income and resources (in other words, how well they are investing the cash under their control). They can also compare an organization's profits to its opponents by analyzing various incomes such as the total revenue margin, operating revenue margin, and net revenue margin (CashInstructor.com, n.d.).

The income statement for the Designer Labels for the year 2011 and 2012 shows that the overall net sales of the company has shrunk in 2012 as compare to the year 2012. Along with this the cost of goods sold by the company has also decreased in year 2012, which has ultimately impacted the gross profit of the company which also shrunk from 2011 to 2012. Despite the decreasing sales the company did not managed to keep its expenses down and the expenses were greater in yea r 2012 than in year 2011. This significantly reduced the net income of the company in year 2012 as compared to year 2011.

The balance sheet informs potential investors or financial institutions, how an organization is doing financially. A balance sheet is a financial overview of an organization's Assets, Liabilities and any Equity value that the organization has at the mentioned period of time of the Balance Sheet. Assets can be cash, amounts ...