B120 TMA03

An income statement, also known as a profit and loss statement shows how much money a company has spent over a period of time. It also shows the costs and expenses that are associated with earning that revenue. It is an important measure of the company’s profitability. The simple building blocks of a net income formula are revenues minus expenses equal net income.

We noticed the following financial health indicators in our forecast: Clarkson Lumber's ratio of total assets to sales is moving from a position in line with high profit outlets to low profit outlets at 37.7%. This is due to accounts receivable increasing to 14% of sales which is higher than the 13.7% experienced by low profit ratios. Also, inventory as a percentage of sales has steadily increased from 11.5% in 1993 to 13.5% in 1996.

In this task I’m going to analyse the figures on cash flow that I created in P3 and justify why you think the business might have problems also provide range of solutions.

When you’re looking at the income statement, you can get information about profitability for a particular period. This is also called the profit and loss statement. The income statement is composed of both income and expenses. This statement can be used to deduct expenses from income and report either a net profit or net loss for that period. This statement will deduct all expenses from income and then report your net profit or net loss for that period. This will allow the business owner to determine if the business is bringing in a good amount of revenue to make a profit. The cash flow statement shows the movement in cash and balance over period. The cash flow can vary depending on the operating activities, investing and financing activities. This statement provides one business owner with insight to the company’s liquidity which is vital to the growth of the business. Reinvesting in business is very important, looking at the statement of retained earnings will tell a business owner how much were reinvested in the company. After profitable period, every big business has to give some of its profits to stockholders, and keep the rest amount as retained earnings. Out of all statements, retaining statement is important to companies that sells stocks to the public. This statement can also provide you with assets and liabilities information. These informations can be used to assess the financial health of your business. The results of a balance sheet will help the business owners to show the risk of liquidity and credit. Looking at these information you can measure trends and relationships to show where in the areas you can improve. These can also be compared to similar companies to show how the business measures up to leading competitors (Ali, 2010). In summary, the financial statements can provide a business owner

From analyzing the business using all the above tools my advice is not to concentrate just on a profit but to deal with small but dangerous issues like: stoke leftovers, paying out debts on time (paying upfront will make your business more reliable for banks). I have come to this conclusion because the business is making less profit from the year before and also there is slight increase in some costs such as wages etc. I would also be concerned that the increase in barrowing is a bit dangerous which can lead to the business being closed in the future or to expend it to the new level. If these patterns continue (increasing value of business rising investments in fixed assets) into 2014 the business could successfully start to pay off the overdraft. I think Michael will be able to cope with the ongoing debt.

A profit and loss account is intended to show a business its income and expenditures and calculate the company’s net profit or loss based upon the difference between those figures. It is extremely useful in determining past performance and to try and predict future results. It enables a business to see what changes could make to improve on its profit. It also give enough information to help a business to set targets.

* An income statement is a report that contains information in regards to an organizations’ assets and financing in order to obtain those assets that is collected over a certain period of time

(Ohara, 2007) Most financial statements are made public for the benefit of stakeholders and potential investors. The bottom-line is that financial statements are the main source for analyzing how well a company is operating. The income (or profit and loss) statement is simply a report card of how much activity (revenue) was performed in the period, how profitable that activity was (gross profit/loss), and what it cost the contractor to run the business (overhead). (Murphy, 2006)

A few years ago I got involved in marketing an expensive brand of vacuum cleaners called Kirby. The product was well designed, of high quality and had many features that were lacking in other leading brands. The marketing strategy used were a combination of selling orientation and product orientation, where the business owners assumed that a sales force would be able to sell the product as long as the right approached was used.

The Income Statement is the financial report that depicts the operating performance of a company (revenues less expenses generated = profit) over a specific period of time and facilitates the analysis of a company’s growth, cost, and profitability. This analysis focuses on the financial analysis of The Lemonade Stand during Season 1 and Season 2.

This income statement tells how much money a company has brought in (its revenues) how much it has spent (its expenses) and the difference between the two (its profit). The income statement show’s a company’s revenues and expenses over a specific time frame. This statement

Describe the nature of income statements. An income statement is a detailed explanation of a firm’s revenues and expenses. It is also sometimes called a profit and loss statement. Information from the income statement and the balance sheet are used to calculate financial ratios that are useful when making investment decisions. The statement is prepared for a set time period – a financial quarter or a fiscal period. When the income statement is prepared financial information is listed in the following order:

An Income Statement provides an overview of an organization’s earnings performance during a specific time period. There are four components to the income statement: revenue, expenses, gains and losses.

The first of the financial statements is the income statement. The income statement states the revenues and expenses in an understandable way that shows a clear picture of net income or net loss for the

This essay will begin to look at the main financial statements used by decision makers in businesses today. This essay will go into detail about the income statement and statement of financial position and whether these two statements provide decision makers with their financial information adequately. This essay will also include the various advantages and disadvantages of each financial statement as well as describing whom the decision makers are and why financial statements are important to them. A conclusion will be present at the end of this essay to demonstrate an overall view of whether financial statements are beneficial to decision makers.