Page 1 of 25

TABLE OF CONTENTS

No Particulars Page. No.

1 Introduction 2

2 Various Sources of Finance 4

3 Implication of various sources of finance 8

4 Case study of highway project and justification 9

of source of fund selected for the project

5 Cost of different sources of finance 10

6 The role of Financial planning and Cash 12

budgeting to avoid over trading

7 Information Requirements for different Decision 13

makers.

8 Impact of Finance on Financial Statements and 14

Interaction of Assets and Liabilities in the
Balance Sheet.

9 Cash Budget for M/S. Angus LTD 19

10 Cost calculation of M/S. Prada Manufacturers 20

Fine Jewellery.

11 Viability study of the project of M/S. Sunrise LTD. 20

12 Purpose of profit and loss account, balance sheet 20

and Cash flow statement account.

13 Difference between the formats of financial 24

statements of different companies.

14 Conclusion 25

15 References, Bibliography and Appendices. 25

 Page 2 of 25

MANAGING FINANCIAL RESOURCES & DECISIONS

Introduction

The “finance” is the lifeblood of each business entity, as well as managing

finance and financial resources are fundamental for the ensure of smooth
run of business types like corporation, s corporation, partnership, sole
proprietorship or limited liability company concerned with all types of
equity/ net worth. Financial Management involved with the financial
function of the profession Accounting, although the financial accounting is
extra apprehensive with historical financial data and financial decision
focused to the opportunities of the organisation. The financial
management and decision making obviously depends the thorough
understanding as well as the evaluation of financial reports such as
general ledger summary or trial balance, income statement, balance
sheet, cash flow statements and statement of changes. Financial Analysis
Consists of Cash Management, collection management, payment
management, instead of that Financial Management area covers that as
follows:

1. Operational analysis: Analysing the cost of sales, gross profit and

net income percentage based on turnover.

2. Resource management: Analysing the current assets, current

liabilities and current ratio.

3. Profitability: Evaluation of return on Total Assets as well as Net

Worth.

4. Working Capital: Working capital management inclusive of

Inventory turnover and the number of days Accounts receivable
outstanding.

Analysing and managing key balances such as cash, accounts

receivable, inventory, accounts payable, total assets and total
liabilities, further to analyse the operational figures such as income,
 Page 3 of 25

cost of sales, expenses and net income. Managing financial

resources and decisions includes the budgeting and budgetary
control that measures the actual and budgeted amounts of
revenues, cost of sales, expenses for a targeted time period, as well
as year to date period with variance and percentage of variance ,
the budget and the changes in budget helps to decides whether any
corrective steps required to correct the current situation such as,
reduction or cut off expenses, increase advertising for generate
more revenue, unsatisfactory activities discontinuance and also to
reach in find new ways of generating revenue.

In other words, finance described as the science of managing the

funds, the common areas of finance are business finance, public
finance and personal finance, those consists of saving and lending
money, as well as the concept based on time, money and risk that
interconnected, beyond that how it is spent and budgeted.

This assignment topic covers the management and control of money

within the organisation, as well as discloses the availability of
different sources of funds available to an organisation and also the
implication of that sources connected with the legal, financial,
control implication and bankruptcy, further the cost of various
sources of finance and conveying with cash budgeting, overtrading
and the information needed for financial decision makers. In
addition it deals with the evaluation of Financial Statements and the
interaction of assets and liabilities in balance sheet with typical
examples and covers the cash budgeting process, production cost
and viability of a product and project, further more it discloses the
purpose of various financial statements and distinguish between the
formats of financial statements of different nature of companies.

1a) Various sources of finance

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The scarcity of cash leads organisations to raise fund through

different sources. The foremost liquid asset of the company is cash
and on transaction basis the money required to meet expenses and
in precautionary basis keep it for unanticipated expenses, as well as
in speculative basis use the money for reaping the benefit of swiftly
arising opportunities. There are many advantages of sufficient cash
such as, availing cash discounts for cash purchases, can maintain
continuous flow of production, surplus cash can invest in a short
term plan and can meet payments in timely manner. In other hand
if the company required in urgency of cash to meet the obligations
of bills, to purchase plant, to take over some other business, it has
to find some source and there are various sources available
depends on the nature of business and size of business.

Internal Source:- The fund generated within the organization like

retained profits, proper utilisation of assets, selling personal holding
assets, proper utilisation of accessible resources, access of personal
finance and savings, earnings from other business entity or
honorarium and working capital management.

External Source:- The finance raised from outside sources of the

organisation like bank loans, issuance of shares and it may
ownership capital and non ownership capital.

The Fig.1 explains the internal sources and external sources of

finance, as well as ownership capital and non ownership capital.

Fig.1

Internal sources External sources

1 Own money Ownership capital Non ownership capital

2 Sale of personal 1 Ordinary shares 1 Debentures

 Page 5 of 25

property 2 Preference shares 2 Bonds

3 Bank Loans

3 Retained profit 4 Overdraft

5 Hire purchase

4 Sale of assets 6 Leasing

and lease back

5 Cheque 7 Trade Credit

discounting
8 Venture Capital

6 Working capital 9 Factoring

Arrangement 10 Franchising

The internal source of money consists of own money in any form , it

may be sale of personal assets or use of retained profit or sale of
assets or by discounting post dated cheques or working capital
arrangements.

Own money: An entrepreneur can contribute own money to the business

as capital and for an urgency also bring additional capital.

Sale of personal property: In an emergency occurred , the fund can

generate through sale of personal belonged assets.

Retained profit: The retained profit can utilise for the meeting of the
raised urgency .

Sale of assets and lease back : The machinery can sold out and the same
can lease back for the continuous use.

Cheque discounting: The post dated cheques holding by the company can
continuously discounted with financial institutions with pre-planned terms
with banks.
 Page 6 of 25

Working capital arrangement: Raise fund by proper management of

current assets and current liabilities.

Ownership Capital

Ordinary shares: The company can issue ordinary shares to raise capital
and can avail the fund without any interest or financial cost. Ordinary
share holders having the voting power and have ownership in the
company.

Preference shares: Preference shares can issue to the present share

holders to generate funds.

Non Ownership Capital

Debentures: debentures are long term loans collected by the company

through issuing debenture. There is no hidden charges and the interest
rate is stable. If the company take the loan against mortgage of fixed
assets like plant, machinery or land and building , it is known as
mortgage debentures, as well as debenture holders not having any
voting rights and the interest paid on debentures shown in financial
reports as charge against the profit of the company. Debentures are
more secured than compared with other sources.

Bonds: The bonds can issue to general public to generate funds with a
steady rate of interest and it is a long term scheme .

Bank Loans: Bank loans or loans from other financial agencies can
arrange with securities, it is with a flat rate of interest.

Overdraft: It is an external source of finance arrangement through the

company’s bank and the interest charges are in daily basis, so the
interest calculated on the basis of how much money the company used
in a daily basis.

Hire purchase: The method of purchase by giving an initial instalment to

the seller when buying a higher valued of assets, raw material , plant
and avoiding to take loans or other sources to avoid interest and
obligation .
 Page 7 of 25

Leasing: The main two types of leasing are financial leasing and
operating leasing.

Grants: The amount from local governments, government agencies,

trade promotion agencies.

Trade Credit: : The line of credit that, the suppliers of the company giving
credit or more credit period to settle the bills and the money can use to
the other urgency. It increases the cash flow.

Venture Capital: venture capital is the money invested by private firms

with pre-decided rate and run the business with them and leaving after
the agreement period.

Factoring: The banks or financial institutions providing money against

the generated invoice or signed contract agreement , to meet the
requirements in the invoice or contract, the bank will provide amount and
charge their percentage of interest.

Franchising: The organisation can let others to start a unit as it is of the

same nature of business beneath the same flagship and can take the
franchising amount.

b) Implication of various sources of finance

The implication of various sources of finance has various aspects

affected in terms of legal, authority and bankruptcy. There are various
types of businesses that incorporated with rules and regulations of the
concerned government. Each entity has its own advantages,
disadvantages, limitations, obligations to different legislature,
government and stakeholders.

Legal
 Page 8 of 25

Entrepreneurship: The capital of the Entrepreneurship companies

brought by the individual owner, so there is no obligation to the general
public for the capital of the firm. The entrepreneur of the firm is
responsible for the loose of finance.

Partnership: The partners of the company responsible and suffer the

consequences of loss of capital.

Public Limited company: The share holders or owners has to suffer the
consequences.

Control: The entrepreneur has cent percent control over the decision
making and in partners the control centralised to partners , more over in
the limited liability company , the authority is diluted by issuance of
shares , because the owners of the company is shareholders.

Bankruptcy:

“Bankruptcy is a legally declared inability or impairment of ability

of an individual or organization to pay its creditors”. Creditors
possibly will file a bankruptcy petition in opposition to a business or

corporate debtor ("involuntary bankruptcy") in an exertion to make back a

portion of what they are owed or commence a restructuring. In the majority

of cases, however, bankruptcy is initiated by the debtor (a "voluntary

bankruptcy" that is filed by the insolvent individual or organization).”

Source: http://www.wikipedia.co.uk

c) Case study of highway project and justification of source of fund

selected for the project.

The basic function of a contracting company is deals the

construction projects and complete the project in a time limit.
The contract agreement shows the prime amount known as
contract value of the project and when signing the contract the
company get an agreed percentage(10% to 15%) of down
payment of the prime amount to start the work. Then the bill
 Page 9 of 25

payment is based on the certified amount , it may be based on

monthly payment certificate .

The Analysis of the political and environmental factors in Sudan revealed

the following points:

1. The uncertainty and civil war made the political atmosphere critical
and not supporting to invest money in Sudan, even though the support
from the present government and external agencies and international
organisations’ support , it is decided that to build the project with an
estimated budget and to complete the road in 7 years.

2. The formal meeting with Sudan Government authorities, the company

signed a legal construction agreement. The Sudan Government availing
the source of fund from international agencies .

3.The contract agreement is not based on BOT (Build, Own, Transfer)

method, but it saying an initial down payment with work certified in time
to time.

Decision: For meeting the additional facilities and resources to engage

the new construction project , it is decided that to issue debentures in
the market to raise additional fund.

Reason: The debentures are for long term and the interest rate is stable,
as well as the debenture holders are no voting power , so there is no
dilution of authority, debentures are more secured than compared with
other sources based on the situation and nature of business. Debentures
are more secured and there is no legal restrictions and dilution of control
and even in bankruptcy it is safe to choose debentures.

2a)Cost of different sources of finance

Internal sources accessible easily with no time

1 Own money: The own money can access easily and avail
immediately, it may from the personal savings or from job or profit
 Page 10 of 25

of other business or honorarium from other companies for the

service. There is no cost involved other than comparing the business
principles, that the business has a separate entity than the owner, so
in business every single money is obliged to give a return.

2 Sale of personal property: sale of personal assets or properties is

another type of source to raise fund, same cost rules applicable as
own money.

3 Retained profit: the access to retained profit is easy to approach and

there is no additional cost involved.

4 Sale of assets and lease back : The cost involved is the lease
amount

5 Cheque discounting: in cheque discounting the rate applied by bank

are involves as a additional cost

6 Working capital Arrangement: The company can raise fund through

reducing the quantity of stock, delay payment to suppliers, these
causes no cost but in long run it will affect the production and
goodwill of company.

Non ownership capital Cost involvement

1 Debentures Long term and steady rate of interest

rate

2 Bonds Declared interest rate, profit sharing

scheme.

3 Bank Loans Applicable the rate of interest charging

by the banks
 Page 11 of 25

4 Overdraft Bank will charge interest on daily basic

for the used money

5 Hire purchase No cash benefits or cash discounted and

a higher rate of price

6 Leasing Leasing charges applicable

7 Trade Credit Trade credit available only on credit price

of the supplier and finance charges are
applicable.

8 Venture Capital Sharing the profit

9 Factoring Bank rates applicable

10 Franchising No cost

Ownership capital

Ordinary shares: The share issue process is time consuming and

under writing charges are involved, moreover diluting ownership
and sharing profit .

Preference shares: Less time than ordinary shares and it is

issuing to the present share holders , so the involvement of
additional expenses are less and dilution of ownership not
affected.

The cost of capital means, the cost for organisations fund of both the
debt and equity. The external sources or investors of the fund expected a
return for the investment, if the investment becomes meaningful, that
the expected return on investment be higher than the cost of capital. The
cost of capital is the expected return from an alternate choice and an
equivalent risk.

The capital structure: for tax advantage on debt issue , it is more cheaper
to issue debt than equity for profitable organisations . If the financial mix
of the company be in “OPTIMAL MIX”, It will helps to fix the structure of
 Page 12 of 25

the capital of the company. When the cost of capital reduced, the value of
the organisation increased.

2b)The role of Financial planning and Cash budgeting to avoid

over trading.

Budget is the plan of business that focused to the future that deals with
the objective of the organisation, fixing the targets and expected the
results based on financial terms of objected sales, growth and cost, as
well as the required investment to fulfil the targets and the sources of
finance for the investment.

Short term budget Long term budget

Annual budget to control and 5 to 10 years aims to give a vision

perform in a year. to the organisation .

Overtrading refers to the term of analysis of financial statements, the

overtrading occurs when the firms made the operation too swift and the
consequences are:

1. The company be in negative circle.

2. Increase of interest expense affect the net profit and working

capital.

3. More borrowing cause to more interest expense

4. Over trading companies suffer shortage of working capital and face

crucial liquidity problems.

Reasons: swift development of business and sales and low net profit and
the business leaders leading with less knowledge, as well as the cash flow
and working capital problems may cause, and more the company has a
wrong cash budget or high amount of accounts receivables for a long
credit period, high rate of interest expense, cut throat competition in the
market, over stock or slow movement of inventory.
 Page 13 of 25

So the financial planning and budgetary control is important in business

to avoid negative trading.

2c)Information Requirements for different Decision makers.

In general decision making is the process of identifying the different

alternatives and choosing . Decision makers required to collect the
information for finding a solution, the steps required are:-

1. Define the problem: find the causes and sub causes and major
efforts of the problem.

2. Find out and collect all the information: collect the informations
from the information possessions.

3. Processing the Knowledge: Process the information collected and

analysing and adding additional information and reach to the
information for decision making

4. Taking the decision: With all related parties , create an opinion from
the opinion collected and processed for decision making , take the
decision for the problem, as well as the monitoring and evaluation
of the solution be considered and it is the vital part too.

Information Required For Financial Decisions

Instead of the common problem solving techniques , the financial

decision making required information connecting with the financial
resources and its utilisation in quantitative values. The corporate
finance and the financial model connected with the cash flow prediction
involved the preparation of detailed models and used for decision
making and the applications includes :-

a. Valuation of business with discounted cash flow

b. Capital budgeting
c. Cost of capital
d. Financial statement analysis
 Page 14 of 25

e. Project finance

Information analysis within the company with financial reports

Financial statements
1. Balance sheet

2. Cash flow statements

3. General Ledger summary account/ Trial Balance

4. Income statement vs. Budgeted

5. Statement of changes

6. Statement of income and retained earnings

2d)Impact of Finance on Financial Statements and Interaction of

Assets and Liabilities in the Balance Sheet.

The balance sheet showing the position of the company that, what it
owned and owed in a particular date. The financial statements including
balance sheet used for decision making and analysis. If the company is in
financial crisis, it has to give close attention to the cash positions and
monitory assets and liabilities. The construction of balance sheet shows :

1.Current assets

2.Fixed assets

3.Total Assets

4.current liabilities

5.long term liabilities/retained profit

6.Total liabilities

The following is a typical example for balance sheet.

 Page 15 of 25

BALANCE SHEET OF M/S.PAVILION DESIGN GROUP AS AT 31.12.2009

ASSETS

Current Assets
Petty Cash 100.00
Cash on Hand 14,850.45
Regular Checking Account 18,367.29
Payroll Checking Account 5,081.38
Savings Account 10,000.25
Accounts Receivable 31,524.02
Contracts Receivable 29,990.05
Other Receivables 4,009.60
Allowance for Doubtful <5,000.00>
Account
Supplies Inventory 61,000.00
Prepaid Expenses 14,221.30
Employee Advances 3,000.65
Notes Receivable-Current 11,000.00
Work in Process 22,000.00
Other Current Assets 120.00

Total Current Assets 220,264.99

Property and Equipment

Furniture and Fixtures 62,769.25
Equipment 38,738.33
Automobiles 86,273.40
Other Depreciable Property 6,200.96
Buildings 185,000.00
Building Improvements 26,500.00
Land 20,000.00
Accum. Depreciation- <26,762.30>
Furniture
Accum. Depreciation- <23,875.23>
Equipment
Accum. Depreciation- <55,074.15>
Automobil
Accum. Depreciation-Other <4,352.52>
Accum. Depreciation-Buildings <35,333.34>
Accum. Depreciation-Bldg Imp <1,541.08>

Total Property and Equipment 278,543.32

Other Assets
Deposits 15,000.00
Organization Costs 4,995.10
Accum Amortiz - Organiz <2,000.00>
Costs
Notes Receivable- Noncurrent 25,004.90
Other Noncurrent Assets 3,333.00
 Page 16 of 25

Total Other Assets 46,333.00

Total Assets 545,141.31

LIABILITIES AND CAPITAL

Current Liabilities
Accounts Payable 44,567.70
Accrued Expenses 6,022.55
Sales Tax Payable 1,428.54
Wages Payable 8,320.30
401 K Deductions Payable 444.70
Federal Payroll Taxes Payable 6,234.05
FUTA Tax Payable 258.20
State Payroll Taxes Payable 985.33
SUTA Tax Payable 658.67
Local Payroll Taxes Payable 113.25
Income Taxes Payable 25,045.75
Other Taxes Payable 9,590.15
Current Portion Long-Term 12,167.00
Debt
Prepaid Production Costs 10,896.00
Publisher Advances-Current 2,415.00
Other Current Liabilities <96.00>

Total Current Liabilities 129,051.19

Long-Term Liabilities
Notes Payable-Noncurrent 13,000.00
Publisher Advances- 6,550.00
Noncurrent

Total Long-Term Liabilities 19,550.00

Total Liabilities 148,601.19

Capital
Common Stock 10,000.00
Paid-in Capital 100,000.00
Retained Earnings 299,996.15
Net Income <13,456.03>

Total Capital 396,540.12

Total Liabilities & Capital 545,141.31

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Typical example for income statement

Current Month Current Year to Date Year to Date

This Year Month This Year Last Year
Last Year
Revenues
Graphic Design Income 2,677.00 0.00 2,677.00 0.00
Photo Income 4,990.00 0.00 4,990.00 0.00
Printing Income 27.00 0.00 27.00 0.00
Production Income 675.00 0.00 675.00 0.00
Shipping Charges 3.95 0.00 3.95 0.00
Reimbursed
Fee Discounts <37.88> 0.00 <37.88> 0.00

Total Revenues 8,335.07 0.00 8,335.07 0.00

Cost of Sales

Total Cost of Sales 0.00 0.00 0.00 0.00

Gross Profit 8,335.07 0.00 8,335.07 0.00

Expenses
Advertising Expense 200.00 0.00 200.00 0.00
Computer/Software 452.00 0.00 452.00 0.00
Expense
Copywriting Expense 360.00 0.00 360.00 0.00
Courier Delivery Expense 15.85 0.00 15.85 0.00
Office Supplies Expense 198.00 0.00 198.00 0.00
Payroll Tax Expense 783.65 0.00 783.65 0.00
Photography Expense 29.75 0.00 29.75 0.00
Printing and Copying Exp 1,195.00 0.00 1,195.00 0.00
Professional Salaries- 3,800.00 0.00 3,800.00 0.00
Billable
Rent-Office 11,250.00 0.00 11,250.00 0.00
Typography Expense 256.00 0.00 256.00 0.00
Wages Expense 3,044.00 0.00 3,044.00 0.00
Other Expense 219.85 0.00 219.85 0.00
Purchase Disc- Expense <13.00> 0.00 <13.00> 0.00
Items

Total Expenses 21,791.10 0.00 21,791.10 0.00

Net Income <13,456.03> 0.00 <13,456.03> 0.00

Cash flow statement

Current Year to Date

Month

Cash Flows from

operating activities
 Page 18 of 25

Net Income <13,456.03> <13,456.03>

Adjustments to reconcile
net
income to net cash
provided
by operating activities
Accounts Receivable <3,703.62> <3,703.62>
Accounts Payable 12,026.45 12,026.45
Sales Tax Payable 3.54 3.54
Federal Payroll Taxes 2,709.03 2,709.03
Payable

Total Adjustments 11,035.40 11,035.40

Net Cash provided by <2,420.63> <2,420.63>

Operations

Cash Flows from

investing activities
Used For

Net cash used in 0.00 0.00

investing

Cash Flows from

financing activities
Proceeds From
Used For

Net cash used in 0.00 0.00

financing

Net increase <decrease> <2,420.63> <2,420.63>

in cash
Summary
Cash Balance at End of 48,399.37 48,399.37
Period
Cash Balance at Beg of <48,399.37> <50,820.00>
Period

Net Increase <Decrease> 0.00 <2,420.63>

in Cash

3.A)

Cash Budget for M/S. Angus Limited

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Particulars Sept. Oct. Nov. Dec. Jan. Feb.

Cash inflows

Cash sales - - - - - -

Credit sales - - - - 3,00 4,000

0.00 .00
Total cash - - - - 3,00 4,000
inflows 0.00 .00

Cash
outflows
Purchase - - 2,50 2,30 3,07 3,461
0.00 7.00 6.00 .00
Overhead 2,20 2,20 2,20 2,20 2,20 2,200
0.00 0.00 0.00 0.00 0.00 .00
Vehicle 3,50
0.00
Total cash 2,20 2,20 4,70 8,00 5,27 5,661
outflows 0.00 0.00 0.00 7.00 6.00 .00
Opening 25,00 22,80 20,60 15,90 7,89 5,617
stock 0.00 0.00 0.00 0.00 3.00 .00
Cash inflows - - - - 3,00 4,000
0.00 .00
Cash - - - - - -
outflows 2,200.0 2,200.00 4,700.00 8,007.0 5,276. 5,661.
0 0 00 00
Loan - - - - - -

Closing stock 22,80 20,60 15,90 7,89 5,61 3,956

0.00 0.00 0.00 3.00 7.00 .00

B) Cost calculation of M/S. Prada Manufacturers Fine Jewellery.

Particulars Ti Ra cost/ricost of
me te ng 60rings
Direct Material Cost 8 15 120 7,
200.00
(8 grams of silver ring @ £ 15 / gram)
Direct Labour Cost
(Production time of 2.5 hrs @ £ 20/hour) 2.5 20 50 3,
000.00
(polishing time of 0.40 hrs @ £ 8/hour) 0.4 8 5.33
 Page 20 of 25

(8/60*40) 320.00
Indirect Expenses
(Factory expenses £10,000 for 500 ring 100 500 20 1,
capacity)(10000/500*1) 00 200.00
Cost of production for 60 rings 195.33 11,7
20.00

3.C) Viability study of the project of M/S. Sunrise LTD.

The sunrise Ltd Company

Particulars Years

1 2 3 4

Sales 100000 80000 70000 55000

Selling price 30 25 20 15

A. Total sales 3000000 2000000 1400000 825000

Direct -575000 -460000 -402500 -316250

labour(5.75)
Variable -500000 -400000 -350000 -275000
cost(5)
Fixed cost(4.5) -450000 -360000 -315000 -247500

Advertisement -550000 -230000 - -

Deprecation -187500 -187500 -187500 -187500

 Page 21 of 25

B.Total exp 2262500 1637500 1255000 1026250

Net profit(A-B) 737500 362500 145000 -201250

Tax 20% -147500 -72500 -29000 -

Net profit after 590000 290000 116000 -201250

tax
Deprecation 187500 187500 187500 187500

Cash flows 775000 477500 303500 13750

Calculation
of NPV
Years Investment PV @ 10% PV

0 -750000 1 -750000

1 775000 0.909 704475

2 477500 0.826 394415

3 303500 0.751 227928.5

4 13750 0.683 9391.25

NPV 586209.7
5

4A) The Purpose of profit and loss account, balance sheet and Cash flow
statement account.

a. The income statement or profit and loss account shows the income
and expenses of a particular period showing a profit or loss , income
exceeds expenses a profit and expenses exceeds the income a loss.

It shows the total revenue/income, total cost of sales and gross

profit or loss, as well as expenses and net income/loss.
 Page 22 of 25

b. The balance sheet discloses the status of the organisation regarding

assets, liabilities and capital for a particular date and it provides a
financial picture .

c. The cash flow statement is the sum of the effects in cash activities
of the operating, investing and financing of an organisation for a
particular period. The cash flow statement shows the changes in
cash in a particular time . The following example gives a clear
picture about the cash flow statement:

Current Year to
Month Date

Cash Flows from operating activities

Net Income 2,480.85 2,480.85
Adjustments to reconcile
net
income to net cash
provided
by operating activities
Accum. Depreciation- 1,262.40 1,262.40
Furniture
Accum. Depreciation- 1,265.25 1,265.25
Equipment
Accum. Depreciation- 4,313.67 4,313.67
Vehicles
Accum. Depreciation- 193.71 193.71
Other
Accum. Depreciation- 1,189.11 1,189.11
Buildings
Accum. Depreciation- 169.87 169.87
Bldg Imp
Accounts Receivable <9,913.28> <9,913.2
8>
Other Receivables <3,672.24> <3,672.2
4>
Inventory 5,555.19 5,555.19
Accounts Payable 6,279.41 6,279.41
Sales Tax Payable 1,869.68 1,869.68
401 K Deductions 767.13 767.13
Payable
Health Insurance <64.53> <64.53>
 Page 23 of 25

Payable
Federal Payroll Taxes 9,663.22 9,663.22
Payable
State Payroll Taxes 1,359.16 1,359.16
Payable

Total Adjustments 20,237.75 20,237.75

Net Cash provided by 22,718.60 22,718.60

Operations
Cash Flows from investing activities
Used For

Net cash used in 0.00 0.00

investing
Cash Flows from financing activities
Proceeds From
Used For

Net cash used in 0.00 0.00

financing

Net increase 22,718.60 22,718.60

<decrease> in cash
Summary
Cash Balance at End of 50,062.15 50,062.15
Period
Cash Balance at Beg of <50,062.15 <27,343.
Period > 66>

Net Increase 0.00 22,718.49

<Decrease> in Cash

4B)The Difference between the formats of financial statements of

different companies.

The nature of the businesses are differ from firm to firm and the account
types decide the grouping of accounts in reports and financial statements
and it controls throughout the fiscal year. General construction of format
is through general ledger heads depends the nature of business.
 Page 24 of 25

1. Payable, receivable, accumulated depreciation, cash, cost of sales,

expenses, income, inventory, long term liabilities, other assets,
current assets, other current liabilities, equity-doesn’t
close(corporation)equity- gets closed(proprietorship)equity-
retained earnings.

2. The format of financial reports differ from firm to firm such as the
bakery business, beauty parlour, accounting firm, construction
company, general trading business has different formats.

4C) Analysis of Financial Report of M/S.IPL. LTD.

2008 2007 2007 -

2008
£ £
Sales 600,000 650,000 50,000 DECREASE/REVANUE
Cost of Goods Sold 300,000 400,000 100,000 DECREASE/COST OF
GOODS SOLD
Gross Profit 300,000 250,000 -50,000 INCREASE/ GROS PROFIT

Less Expenses:
Wages 40,000 36,000 -4,000 INCREASE/EXPENSE
Rent and Rates 36,000 34,000 -2,000 INCREASE/EXPENSE
Heating 25,000 24,000 -1,000 INCREASE/EXPENSE
Salaries 50,000 50,000 0
Advertising 18,000 16,000 -2,000 INCREASE/EXPENSE
Miscellaneous 20,000 20,000 0
Net Profit 111,000 70,000 -41,000 INCREASE/NET PROFIT
Add retained earnings 15,000 86,000 71,000
b/f
126,000 156,000 30,000
Less Proposed Dividend 40,000 20,000 -20,000
86,000 136,000 50,000

The balance sheet shows a current asset of 125000 and current liability
100000, in the year 2008, so the current ratio is.

Current Ratio = current asset /current liabilities

=125000/100000=1.25(1:1.25)
 Page 25 of 25

The liquidity ratio is satisfactory and the return on equity, debt to equity,
average collection period are satisfactory.

Conclusion

The management of finance and financial resources leads to

sound decisions regarding the financial decisions of the
organisation , as well as it helps the organisation to attain the
organisational goals.

References

Swan, Jonathan (2006). Practical Financial Modelling,2nd edition ,London,

CIMA Publishing.

Tjia, John (2003), Building Financial Model, New York, McGraw-Hill.

Robert Harris (2008) Introduction to decision making,

Peach Tree Complete Accounting2008, software.

Weblioreferencing

http://www.wikipedia.co.uk
http://www.mindtools.co.uk