Managing Financial Resources and Decisions Assignment 2 BTEC Nguyen Huu Phong 2017

Managing Financial Resources and Decisions Assignment 2 BTEC Nguyen Huu Phong 2017 tại University of Greenwich Viet Nam, đây là một trong những môn rất quan trọng và cần thiết cho những người muốn theo nghành businness cụ thể là human resource management như mình. Bài assignment này được mình làm tại trường. Các bạn có thể xem và tham khảo nhưng lư

ASSIGNMENT FRONT SHEET <No.2>

Unit number and title H/601/0548: Managing Finance Resources and Decisions

Learner declaration:

I certify that the work submitted for this assignment is my own and research sources are fully acknowledged

Grading grid

In this assignment, you will have opportunities to provide evidence against the following criteria Indicate the page numbers where the evidence can be found

LO4 Be able to evaluate the financial performance of a business

4.1 Discuss the main

financial statements

Financial statements: Basic form, structure and purpose of main financial statements ie balance sheet, income statement, cash flow statement

4.1

4.2 Explain the impact of

finance on financial

statement

How different types of finance and their costs appear in the financial statements of a business; the interaction of assets and liabilities on the balance

4.2

4.3 Compare appropriate

formats of financial

statements for different

types of business

Distinctions between different formats of financial statement fordifferent types of businesses ie limited company, sole trader

4.3

4.4 Interpret financial

statements using

appropriate ratios and

comparisons, both internal

and external

Key accounting ratios for profitability, efficiency and investment; comparison both external ie other companies, industry standards and internal ie previous periods

4.4

(note on Merit/Distinction if applicable)

Merit descriptor No (M1) Identify and apply strategies to

find appropriate solutions

Merit descriptor No (M2) Select/design and apply

appropriate methods/techniques Merit descriptor No (M3) Present and communicate

appropriate findings Distinction descriptor No

(D1) Use critical reflection to evaluate own work and justify valid

conclusions

Distinction descriptor No

(D2) Take responsibility for managing and organizing activities

Distinction descriptor No

(D3) Demonstrate convergent/ lateral/Creative thinking

Assessor’s Signature Date

IV Grading Check: Comments if any:

Agree

Disagree Modify grade to

<ATTACHED EVIDENCE>

Introduction 7

LO4 Be able to evaluate the financial performance of a business

4.1 Discuss the main financial statements 7

4.2 Explain the impact of finance on financial statement 10

4.3 Compare appropriate formats of financial statements for different types of business 11

4.4 Interpret financial statements using appropriate ratios and

comparisons, both internal and external 12

Conclusion 18

References

Any business in the market when it comes to operations and development when it comes to outside capital needs to disclose information about the situation, growth, and development of that business A specific financial report In this report, I will detail the corporate financial statements and how important it is to a business

LO4 Be able to evaluate the financial performance of a business 4.1 Discuss the main financial statements

In this section, I will introduce related articles in financial statements such as Income statement, Balance sheet, and Cashflow statement I will detail each of the items below

Financial statements record all activities of a business, its development, and growth The analysis of financial statements helps us to understand whether a business is performing well, the analysis of financial statements enables investors to make the decision whether to invest or to withdraw from the business before the business down or not

As mentioned above, the basic financial statement will have three main parts: Income statement, Balance sheet, Cashflow statement

Income statement

The income statement is a measure of the performance of a business over a specified period of time, which

is up to the fiscal year Through the income statement, we can see the profit or loss of that business

Here is an example of what an income statement looks like and includes:

(education.howthemarketworks.com, 2016)

This report includes key elements such as revenue, financial expenses, selling expenses, income tax and other revenues Income statements are used to evaluate whether a business is doing well and making a profit, and of course it is published quarterly or fiscal year

From the income statement, evaluators can analyze the change and growth of that business in the field of business On the other hand, they also calculate dividends and profit margins that investors earn when the company is profitable

Balance sheet

The balance sheet includes the assets, liabilities and equity of an enterprise The balance sheet will indicate the financial status and economic resources of an enterprise, based on which it can assess the amount of the business loan

The balance sheet follows the formula:

Assets = Liabilities + Equity

(myaccountingcourse.com, 2016)

Assets are what a business owns and are usually measured in cash There are two types of assets that are long-term assets and short-term assets

Long-term assets include long-term investments such as bonds, real estate, buildings, facilities, machinery, etc In addition, long-term assets may include knowing- Formula secret or patent, the brand of a business Short-term assets include assets that will be sold, transferred to cash and can be used to liquidate short-term liabilities Specific short-short-term assets include cash, receivables A liability is considered a debt of a

business Debts include short-term and long-term loans, more specifically, wages, taxes, loans from outside Equity is the number of assets that the owner of the business, the shareholder contributing to the company, and the equity can be called "net assets." Income is reinvested in the business or used to pay off debt, then it is distributed to shareholders under their holding, which is called dividends

Cashflow statement

Cashflow statements are reports that a business must report to authorities and the public The cashflow statement evaluates

an enterprise's cash flow by three main activities, investment and financing Cashflow statements help to point out information that can help assess the quality

of your business's income, liquidity, and liquidity

(myaccountingcourse.com, 2016)

4.2 Explain the impact of finance on financial statement

According to Investopedia stated that: "Interest expense is the cost incurred by an entity for borrowed funds Interest expense is a non-operating expense shown on the income statement It represents interest payable on any borrowings – bonds, loans, convertible debt or lines of credit."

Cost of goods sold (COGS) are the direct costs attributable to the production of the goods sold by a

labor costs used to produce the good It excludes indirect expenses such as distribution costs and sales force costs

Beside that, according to Investopedia state that: "A tax expense is a liability owing to federal, state/provincial and municipal governments Tax expenses are calculated by multiplying the appropriate tax rate of an individual or business by their income before taxes, after factoring in such variables as non-deductible items, tax assets and tax liabilities."

The capital of an enterprise usually consists of two sources, the owner's capital and the source of capital,

or debt It is indispensable for a business to combine both equity and equity However, balancing these two types is also a necessity and flexibility in each period If an enterprise owes too much debt, it will lead to higher debt, higher interest expenses and an impact on profitability in the statement of income The high-interest expense will greatly affect the net revenue of the business to pay a large proportion of high-interest expenses On the other hand, the high-interest expense will cause the amount of cash to fall and the revenue from the business result will also decrease

Capital expenditures have a large impact on the balance sheet and are influenced by the source of business use The basic thing is that when the cost of sales is lower and the cost of capital is not balanced, the business will suffer a certain loss This is a negative situation when it affects both the ability to pay the charges and interest expenses, debts of that business

Taxation is a mandatory requirement that any business must be obliged to pay to governments in the countries in which it operates The tax is calculated based on the net income of a business and does not affect the debt This is the point where so many companies around the world are spilling billions of dollars

in taxes like Google, Apple, Facebook, etc These businesses usually borrow money from outside to invest, even though their finances are big The main purpose is to avoid too high taxes when their revenue

is too large

4.3 Compare appropriate formats of financial statements for

different types of business

Definition A sole trader is the simplest form

of business structure and is relatively easy and inexpensive to set up As a sole trader you will be legally responsible for all aspects

of the business You’ll generally make all the decisions about starting and running your business and you can employ people

A type of business organization in which two or more individuals pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement

Advantages and

disadvantages

As a small business, organizational structure is simple and easy to manage The initial investment cost is not high and the number of employees is low,

so the salary cost is low Most importantly, control and decision making in the enterprise category

is much easier, often led by the founder

Business activities are limited by the owner's capital Problem solving ability is not high due to concentration in one person All responsibilities are concentrated

on the owner and the personal income tax is higher than the larger corporate tax

Flexible capital is a big strength when many people contribute capital The ability to solve problems is higher due to the mutual support between the capital contributors The amount of work spread and reduced the pressure, not focusing on too many people

Disagreement is a huge limitation of this type of business In addition, profit is a sensitive issue as there are many contributors and are often not clearly divided

Formats of financial

statements

Since only a business owner establishes and owns the business owner's capital, business income

is considered income of the business owner This tax will not

be counted as corporate income tax but will be charged as personal income tax The weak point is that personal income tax is higher than corporate income tax

Financial statements of this type of business will be evaluated as financial statement for the enterprise

as this type of enterprise has higher number of members

4.4 Interpret financial statements using appropriate ratios and comparisons, both internal and external

In this section, I will analyze the specific financial statements of a business so that we can see the growth, growth and business of that business through multiple quarters

The group I am analyzing in this section is Apple Tech giant and being the most valuable corporation in the world at just $ 810 billion in May 2017 Apple was founded by Steve Jobs and Steve Wozniak in 1976 and is currently led by CEO Tim Cook based in Cupertino, California

Income Statement

Balance sheet

Cashflow Statement

Looking at Apple's financial statements for the last three-quarters is the first quarter of 2017 and the fourth quarter of 2016, we can see that Apple's revenue tends to rise extremely strong in the first quarter of 2017 and quarterly The return to the average is slightly higher than the fourth quarter of 2016 Originally, this may have been due to the fact that it sold its latest iPhone, the iPhone 7, and the huge consumer demand that led to strong sales

Q4 / 2016: Revenue of $ 46 billion and profit of $ 17 billion

Q1 / 2017: Revenues reach $ 78 billion and profits reach $ 30 billion This is the quarterly sale of the latest iPhone 7 / 7plus and the purchasing power is too great

Q2 / 2017: Revenue is only $ 52 billion and profit is $ 20 billion

In general, Apple's business is growing quarter by quarter and has spiked to new quarter sales Apple's current business situation is very good

Earnings per share

According to Investopedia stated that: “Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock Earnings per share serves as an indicator of a company's profitability.”

Calculated as:

In this formula, dividend per share (DPS) is the total dividends paid out over a whole year (including dividends but not including special dividends) divided by the number of outstanding ordinary shares issued Average Outstanding Shares can be the average number of shares in circulation or the number of shares outstanding at the end of the year

Q4/2016: (9.014x0,00228)/5.214 = 0,0039

Q1/2017: (17.891x0,00228)/5.214 = 0,0078

Q2/2017: (11.029x0,00228)/5.214 = 0,0048

We can see in the quarter, the earnings per share Apple is uneven and the highest is still Q1 / 2017

Price-Earnings Ratio

According to Investopedia stated that: “The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings The price-earnings ratio is also sometimes known as the price multiple or the earnings multiple.”

Calculated as:

The price-earnings ratio (P/E ratio) = Market Value per Share / Earnings per Share

Q4/2016: 113/0,0039 = 28,9

Q1/2017: 155/0,0078 = 19,87

Q2/2017: 143/0,0048 = 29,7

Apple's Price-Earnings Ratio continues to rise sharply in Q1 / 2017 and decline in Q2 / 2017 growth

Return on Assets Ratio – ROA

According to Investopedia stated that: "Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets ROA gives an idea as to how efficient management is at using its assets to generate earnings Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage Sometimes this is referred to as "return on investment"."

Calculated as:

Return on Equity ratio (ROE)

According to Investopedia stated that: "Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested."

Calculated as:

Looking at the table above, we can see that Apple's ROA and ROE are always sharply increased in Q1 /

2017 (ROA of 5.4% and ROE of 13.5%) and then fall in Q2 / 2017 Growth and till higher than Q4 / 2016 This is a good sign that Apple's business is very good, and revenue is a big part of it

Conclusion

Through this report we can see how important financial statements are for a business and on which we can assess the business situation, the level of growth and development of the business Karma to make the right investment decision