Balance Sheets and a bunch of other stuff (1 Viewer)

[spoonbender]

I have an Accounting/Finance assignment due, but I lost my textbook so I thought I'd ask for help here:

How do you do a balance sheet and what do you need to include?

Does drawings belong in a revenue statement or a balance sheet (or both)? Is drawings considered an Expense or Owner's Equity?

What does 'establishment costs' mean? I need to include specific relevant costs and general costs for your business."

What are some strategies for improving net profit?

 

[jazzbaby]

BALANCE SHEET
you need:
Name of business ....... Date

Assets
current
cash , stock, debtors
non current
machinery vehicles etc

Liabilities
current
overdraft, creditors,credit card debts

non current
mortgage etc

owners equity
owners capital , retained profit




remember: assets= o.e + liabilities


hope i was of some help
x

 

[eskimoh]

strategies for improving net profit; reducing expenses (factoring acounts payable, encouraging/discounts on early payments, reducing employment/making employees on a more casual basis in times of lower business activity so you are not wasting funds on wages when you dont entirely need all the labour, reorganise the structure of ur liabilities/loans/overdrafts etc.. making smaller and more regular payments to reduce the burden and make sure they are not cutting into your gross profit in big chunks)

 

[michael1990]

Easy way to remember Balance sheet from Revenue Statement.

Balance sheet =everything has to balance (Assets= Liabilities + owners equity)

As for improving net profit, its quite simple.
How do you think the business would make more money?
Increasing sales and decreasing expenses.
(using less inputs to recieve the same or more output)

Drawing are an expense.
They belong in the Revenue Statement.

I believe establishment costs refer to anything that needs to be purchased for you to start your business. (Equipment, property and such).

Anything you need help with, don't hesitate to ask.

 

[spoonbender]

Thanks for the help all, especially with the strategies

Okay, here's another thing I've got trouble with. "Quoting two pieces of evidence from the balance sheet, describe the health of the business". ..How exactly do I describe the health of the business?

 

[michael1990]

Thanks for the help all, especially with the strategies

Okay, here's another thing I've got trouble with. "Quoting two pieces of evidence from the balance sheet, describe the health of the business". ..How exactly do I describe the health of the business?

How well is the business going?

You will have to use the 5 objectives of financial management.
Liquity
Profitability
Growth
Return on Capital
Efficiency
(depending on the statement given)

And just comment using the ratios as evidence.

 

[spoonbender]

Wow, I don't even think I learned that! lol. So if the total Assets are greater than the capital then would that be considered good return on capital and profitability/good health? Would Total Owners Equity be a more appropriate figure to use than capital?

 

[michael1990]

Wow, I don't even think I learned that! lol. So if the total Assets are greater than the capital then would that be considered good return on capital and profitability/good health? Would Total Owners Equity be a more appropriate figure to use than capital?

Hang on.
You need to research the 5 objectives first.

They all have certain ratios to go with them.
The ratios enable us to see how well/ how bad they are doing and benchmark it.

So just research them first.

Example, mega sales and next to no expenses=Huge profitabilty.
Sales=$100 000
Expenses= $1000

 

[veloc1ty]

Financial objectives are learnt in year 12.

Anyway to quickly determine if a business is healthy:

You check current ratio for short term health (CA/CL). If it's >1 then it means they can cover their debts fine. If it's >2 they're probably not using all their cash very effectively.

Also check the debt to equity ratio (total debt/total equity) for long-term stability. If it's low geared (i.e. <0.6) they're in a better position right now because they aren't suffering too much from increasing interest rates.

 

[Bedouin]

Does anyone know how to do ratios when it comes to business ?
how do you do the calculation ?
Lets say.

Current Assets: $ 60,000
Current Liabilities: $ 40,000

What would be the ratio for that ?
​

 

[seano77]

Does anyone know how to do ratios when it comes to business ?
how do you do the calculation ?
Lets say.

Current Assets: $ 60,000
Current Liabilities: $ 40,000

What would be the ratio for that ?
​

Current ratio is current assets divided by current liabilities and measures a businesses ability to meet it's short term financial obligations (also known as liquidity). So the ratio is 1.5:1. So for every one dollar of short term debt (current liabilities), the business has one dollar and fifty cents to meet it.