The financial statements of Stone Limited for the most recent two years is shown belo Extract from statement of profit or loss for the year ended 30 April 2019 2018 £'000 £'000 224,000 195,000 (169,200) (136,500) 54,800 58,500 (32,700) (38,040) (10,900) (12,680) (1,900) (1,380) 9.300 6.400 Revenue Cost of sales Gross profit Administrative costs Distribution cost Finance cost-loan note interest Statement of financial position as at 30 April. Assets Non-current assets Current assets: Inventory Trade receivables Cash balance Total assets Equity and liabilities Ordinary share capital Retained earnings £'000 2019 12,800 24,600 1.600 £'000 37,000 39,000 76,000 16,000 26,200 42,200 2018 £'000 £'000 9,800 21,600 2,400 28,600 33,800 62,400 16,000 18,600 34,600
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
a) Calculate the cash operating cycle of Stone Limited for the year ended 30
April, 2018 and 2019.
b) Based on the result of the previous year end and the industry average. Draft
a report addressed to the Board of Directors of Stone Limited analysing the
performance of the company for the year 2019
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