could some help me on these questions
a. Describe and explain the use and limitations of ratio analysis in assessing the performance of a business
b. Describe the sources of finance available to organisations and the advantages and disadvantages of each one.
c. Describe what is meant by assets and liabilities providing specific examples and explanations for each one
d. Describe the main financial statements that organisations produce and identify which interest parties may use them and why.
Accounting Revision Watch
- Thread Starter
- 07-12-2010 16:00
- 12-12-2010 10:52
a) Not quite sure about this. I will get back to you.
b) First of, we do not know if the organisation is a Sole Trader, Partnership or a PLC. If it is a sole trader, then the best method would be a Bank Loan. This is advantageous as the bank can supply a large sum of money which is highly likely required for a Sole Trader. The disadvantage is that it is extremely difficult for a sole trader to obtain a bank loan. They must have a solid business plan.
For a PLC, then there could be an issue of shares at a premium (Rights Issue). The advantage of this is that it is easy cash. The disadvantage of this is that you will have to dilute the ownership of the PLC as more shares are being issued.
c) An asset is what a company OWNS. An example could be their Premises as they own that Premises. An Liability is what a company OWES. An example could be Trade Creditors. This is because the company has to pay money to them which is already owing (i.e:- they bought something on credit and are paying for it now.)