Wait a second!
More handpicked essays just for you.
More handpicked essays just for you.
Assignment on financial statement analysis
Assignment on financial statement analysis
Principles accounting 1
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Recommended: Assignment on financial statement analysis
● Expenses (costs associated with the production of revenues)
● Losses (from the sale of long-term assets below the original price paid by the company.)
Information from the income statement and the balance sheet are used to calculate financial ratios that are useful when making investment decisions.
Payette High School Designs constructs an annual profit and loss statement. Our fiscal year is from January 1-December 31. Our profit and loss statement shows that we have a very small return on sales (0.7%). This would be very concerning if we were a normal, for-profit business. We operate the business during the school day and use the excess time during our class period to learn about entrepreneurship, business operations, finances, and economics.
…show more content…
For example, adult garments sized small through extra-large can be purchased from the supplier for the same price. PHSD pays a premium price for extended sized garments and those costs are passed on to the customer. The prices of the garments are marked up on the pricing sheets several dollars. In some cases, the profit on the item is more than others. Extended sizes may receive a $2.00-$4.00 surcharge depending on the size. For example, if a customer were to order a size 2XL shirt, they would pay two additional dollars. The markup on a Gildan 2XL shirt is 57% while the markup on a Port and Company Shirt is 41%. Student managers are mindful of pricing analysis when recommending products. Certain products are preferred for consistency so inventory levels can be …show more content…
Payette High School Designs is fortunate that many expenses are covered by the school district. Additionally, careful inventory control should allow the business to order what is needed for each customer order. This is not always possible because student managers attempt to forecast sales for spirit shirts. This year, too many items were ordered and there is an excess of inventory which needs to be moved. Breakeven analysis should be utilized going forward on orders such as these to determine how many items would need to be sold and at what price before the order is placed to determine if the order is
Company has been losing money since the first quarter of 1992. Financial fundamentals are sagging:
Ratio Analysis is very important tool for analysing the financial position of the company. The ratios which I would use to analyse the company as an investor are as follows:
Review the Break-Even analysis tool. Using the calculator on this website, calculate the break-even point for your chosen health care business. Save the document with term Break_FirstName. Save it as Portable Document Format (.pdf). (10 points)
Financial ratios are important because it takes information from an organizations financial statements and calculates the information into useful information that can be compared to other organization within the same industry. Financial ratios also inform management and investors how well the organization is performing financially and the organizations operating efficiency and profitability. Financial ratios are also important to banks and financial institutions because these ratios determine the credit worthiness of the organization in order to see how well they are paying back their lenders and vendors in order to determine if the organization needs a loan or line of credit, how much of a risk the organization is.
Lululemon’s has to produce and sell 150,000 jackets in order to cover their total expenses, fixed and variable. At this level of sales, Lululemon’s will breakeven (profit = loss).
Ratio analysis isn't just picking different numbers from the balance sheet, income statement, and cash flow statement and comparing them. Ratios compare facts against previous years, the industry, other companies, or even the economy in general. Ratios look at the relationships between values and relate them to find out how a company has performed in the times of yore and might perform in the future. The echelon and chronological trends of these ratios can be used to make inferences about a company's financial condition, its operations as well as the attractiveness as an investment. Financial ratios are calculated from one or more pieces of information from a company's financial statements. They investigate thoroughly the financial condition of a business and can assist in making a decision about whether a company has the financial backup to support the console and achieve success or not.
Information on the financial statement can offer an overview of a company’s performance over the past fiscal year. However, gaining crucial investment insights requires financial manipulation that yields financial ratios.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound.
Financial Ratios: What They MeanIn assessing the significance of various financial data, managers often engage in ratio analysis, the process of determining and evaluating financial ratios. A financial ratio is a relationship that indicates something about a company's activities, such as the ratio between the company's current assets and current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios is the company's financial statements that contain figures on assets, liabilities, profits, and losses. Ratios are only meaningful when compared with other information.
With losses of $1.87 million on sales of a record high in net sales of $148 million, the focus is on the income statement. The income statement shown in Exhibit 1 illustrates the problem of spending too much on expenses. The budget on expenses was not clearly thought out, as in 1994 Ben and Jerry’s lost a significant amount of money. If this type of budgeting continues, the ice cre...
The Company cannot set off the losses 400 against the profit 6000. As per the prudence concept ,anticipated profits and sales should not be considered for financial statement. However predicted losses one be considered and make provisions for those future losses.
Loss is the excess of expenses over revenue in an accounting year and represents increase in owners’ equity.
As the end of the year approaches, small business owners look for ways to become more profitable in the coming year. Retailers closely monitor their profit and loss (P&L) statement to evaluate the financial goals they need to reach in order to make a profit. A P&L statement can shed light on whether a business has the capital to start and sustain itself and where a retailer might reduce its costs or increase sales to reach the projected net profit. P &L statements are also developed to guide retailers toward their financial mark; if a company is off the mark a retailer can determine where to adjust to meet the mark, keeping net profits in the black.
Members of a firm such as financial managers and accountants, prospective and current investors, prospective creditors, and accounting students, as well as many more people who may use these ratios. Although all persons listed above might use these ratios, they may have different motives for calculating these ratios. These ratios, when applied to different people, continually have the same meaning behind what they represent and stand for. All who calculate these ratios most commonly are looking to assets the company’s financial standing and position. The firm itself will be looking to find weak points in the business and see where and what changes need to be made.The firm looks for internal control purposes within the budgetary process and isolate problems before they get too big. The accountant uses these ratios to calculate information for other members of the firm to be able to interpret the company’s standing. Prospective and current investors may use these ratios to look into companies they have invested in or plan on investing in, to see what may be a proper investment, based on liquidity, potential, value and earnings. Prospective creditors would use these ratios to determine payback ability. Accounting students may use these ratios to simply crunch numbers, it does not have meaning besides where and when the calculation is applied. Many people can use these ratios if they have proper information to understand how well a
For example, Chipotle incurred higher loss on disposal and impairment of assets because they company wrote down the value of the long-term assets of its ShopHouse restaurants, which were 15 non-Chipotle concept fast food restaurants, since the company was seeking strategic alternatives for the concept. Another example is Chipotle’s decision to not implement an internally developed accounting software, which lead to higher loss on disposal and impairment of assets in 2015 (CMG, 2017). As demonstrated by these two examples, loss on disposal and impairment of assets are often unusual and non-recurring. Thus, no projections are made for this extraordinary item, that is loss on disposal and impairment of assets are assumed to be zero for 2017 and