Accounting Finance Essay - 1375 Words

Accounting & Finance (Essay Sample) Content: Accounting FinanceAuthorà ¢Ã¢â€š ¬s NameInstitutionà ¢Ã¢â€š ¬s NameTask-1 1 There are number of users which specifically count under a financial statement. Some of the major users of a financial statement are shareholders, investors, creditors, Bankers and Government authorities; however the information which they would like to examine varies from user to user (Cokins, 2001). There are different needs of each of the user and they subject to revive and utilize the same 2 There are number of regulatory standards which specifically present and influence over the financial statements like International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Standards (GAAP), which are some of the major standards specifically used to make financial statement (Goektuerk, 2007). 3 The implication of every user varies from organization to organization, as shareholders and investors would implicate their analysis on the basis for the investment and its relate d purpose, while bankers would like to have information regarding the debt and equity 4 There are number of laws and regulations which specifically associated with the financial statements like laws of revenue, expenses and net income recognition.Task-2Income statementINCOME STATEMENT FOR THE YEAR 2012 2012 Sales 4041550 Less: Cogs 2504975 Gross profit 1536575 Less: Expenses Wages expense 1007000 Utility expense 47000 Insurance expense 399000 Rent Expense 0 Fuel Expense 8800 Office supplies expense 9300 Advertising expense 37500 Bad debt expense 48200 Depreciation expense 571300 Interest expense 20125 Lease expense 39000 Net operating profit/Loss -650650 Add: Interest income 114736 Add: Service sales 546800 Add: Gain from land sale 750000 Add: Gain from equipment sale 216000 Add: Gain on investments 10000 Net income 986886 Balance sheetBALANCE SHEET AS AT 31 MAY 2012. 2012 Assets Cash 388,1526 Marketa ble securities 136000 Accounts receivables 1476012 less: Allowances for bad debts -177121 Interest receivables 0 Prepaid insurance 260836 Prepaid lease 39000 Prepaid rent 29050 Office supplies 13220 Inventory 738,650 Current assets 4,802,832 Office furniture 72300 Equipment 1,981,000 Motor vehicle 171,400 Long-term notes receivable 285,000 Land 1,180,000 Patent 84,000 Noncurrent assets 3,773,700 Total assets 8,576,532 Liabilities Accounts payable 1,009,619 Wages payable 46,000 Interest payable Short-term notes payable 510,000 Deferred revenue 11,200 Dividends payable 1,130,000 Bond interest payable 3,244 Bond premium 1,376 Current liabilities 2,711,439 Long-term notes payable 1,320,000 Bonds payable 100000 Total Liabilities 4,031,439 Stockholdersà ¢Ã¢â€š ¬ equity Common stock 1,000,000 Additional paid in capital 2,128,406 Non shareholder capital 526,000 Retained earnings 790,687 Total stockholdersà ¢Ã¢â €š ¬ equity 4,545,093 Total liabilities and sh.equity 8,576,532 Financial Ratios Profitability Ratios 1 Net Profit margin 24.42 2 Gross Profit margin 38.02 3 Return on Equity 21.71 4 Return on Assets 11.51 The profitability ratio in the table illustrate that the overall profitability of company is quite well because the in the year 2012 the company has net profit margin is 24.42 % that is one fourth of total revenue (Kaplan and Anderson, 2007). This means that the total income of the company is a quite good after excluded all expenses and taxes. The net profit margin of company is showing the upward trend if we compare it to the last year NPM thatà ¢Ã¢â€š ¬s indicating company is consistently performing. While the Gross profit margin of company is just 14% greater than net profit that shows company has very good control on its expenditure which does not affect the earning of company at optimum level. This is good sign for company and its efficiency of operations as well. The gross profit margin does not provide exact position of company but it helps to understand the pricing strategy of company and give good information about financial health of company.Return on equity and return on assets indicate the profitability of company in terms of equity and assets respectively (Maher, Stickney and Weil, 2001). It also helps analyst to understand efficiency of company in utilizing the equity and assets of company to earn profit. The RO...