Main Financial Statements and the Formats of Financial Statements for Various Forms of Businesses9
Formats of Financial Statements11
Interpretation of Financial Statement Through the Ratio Analysis11
Profitability12
Liquidity12
Asset Efficiency12
Management of Workign Capital13
Solvency Ratios13
Investors Ratios13
Discounted Pay Back and Net Present Value13
Unit Cost in the Project14
Conclusion14
References15
Financial Decisions and Resources
Introduction
This assignment is focused on analyzing the performance of Trevor Plc through the use of ratio analysis and the decisions regarding the new project which the company is going to undertake. This will be done through the focus on the formats and types of financial statements. The ratio analysis is also performed for the company.
Discussion
Sources of Finance
The internal sources of finance for the company are:
Personal Savings
It is one of the most widely used sources of finance as Trevor is dependent on the savings for the source of finance.
Retained Profit
It refers to the profit that has already been made and has also been set aside for investing in the business. It can be used for the purchase of a new IT system, machinery or the advertising and marketing (Lee, n.d.).
Working Capital
It refers to the short term money that is reserved in Trevor for the day-to-day expenses which includes invoice payments, bills, rent, salaries and stationery.
Sale of Assets
There can be a surplus in the fixed assets which can be machinery or buildings that could be sold for generating money for the new areas. The decisions for selling the items which are still in the use should be done carefully as it will affect Trevor's capacity to deliver the current services and products (Lee, n.d.).
The external sources for financing of Trevor include:
Shares
Trevor can sell more shares to the existing or new shareholders in the exchange for the return on the investment.
Loans
The company can have debenture loans that have a variable or fixed interest that are main secured against the asset in which the investment is made. In this situation, the loan company has the shared interest which is legal in the investment. It also shows that Trevor will not be able to sell the asset without the agreement of the lender. In this case, the lender also has the priority over the shareholders and the owners in the failure of business and the cost will be needed to repay despite the loss. There are also other forms of loans that have fixed payment. They are more flexible than the debenture loans (henleybusinessreview.wordpress.com).
Overdraft
It is a good source for the short term finance for helping the company to reduce the seasonal effect on the cash flow that will not require a long term solution. The benefit is that the interest is calculated on a daily basis due to which its cost is lesser than that of loan (henleybusinessreview.wordpress.com).
Hire Purchase
This form of arrangement allows the firm to get ...