1a. Profit and Loss account
A profit and loss account is intended to show a business its income and expenditures and calculate the company’s net profit or loss based upon the difference between those figures. It is extremely useful in determining past performance and to try and predict future results. It enables a business to see what changes could make to improve on its profit. It also give enough information to help a business to set targets.
We can learn more from the statement. As it shows the expenses so we can see clearly see where the largest expenses are, this could then be used to identify the immediate areas to focus on when trying to save on expenses.
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1B) The Purpose of a Profit …show more content…
It is a useful tool for any business as helps you to plan how much and when to borrow and how much available cash you're likely to have at a given time. Many banks require cashflow forecasts before considering a loan. Also because a cash flow gives a greater picture of the money avilable to the business it will be highly helpful for planning and management of future financial commitments
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B. The Purpose of a cash flow
From looking at the Cash flow for this business I have noticed a couple of issues to be concerened about. First of all I have noticed that there is a great increase owed by the business to the Debtors so this will be money leaving the business within the near future and if this continues to rise then the businesswill fall into huge debts and could end up bankkrapt. Overall there is to much cash flowing out of the business and we have seen another increase by over £5000 overall. Also there is a decrese in the amount investments in fixed assest, which could either mean the business is investing less or less of the assest were sold from last year which is bad news for any business.
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From anylising the business using all the above tools my conclusing is that Kathryn should Sell her store and retire. I have come to this conclusing because the business is making less profit from the year before and also there is an increase in many cost such as wages etc. I would also be concered about the drop in