• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

of the trading and profit and loss account and the balance sheet of Alumwell Motors Ltd

Extracts from this document...

Introduction

To: Soya Hoberista and Lord Saber From: Nishtar Hussain Reference: Interpretation of the trading and profit and loss account and the balance sheet of Alumwell Motors Ltd Date: 06/03/12 Introduction As previously requested, I was informed to provide some financial advice for our new client, Alumwell Motors Ltd. They are a fairly new business with two major shareholders Soya Hoberista and Lord Saber. The businesses core purpose is to purchase and sell new and used cars, however they have just completed their second year of trading. You requested some professional advice on how the business is performing and whether they are in a strong enough position to expand their business. I will also provide financial advice on the first two years' of the trading and profit and loss account and the balance sheets. The layout and contents of a Profit and Loss Account Alumwell Motors Ltd Trading and Profit and Loss Accounts 31 December 2010 2011 Sales 700 800 Less Cost of Sales 450 600 Gross Profit 250 200 Less Expenses Wages 60 65 Rent and Rates 15 16 Light and Heat 10 11 Advertising 6 5 Insurances 9 10 Directors' Salaries 25 27 Sundry Expenses 5 6 130 140 Net Profit 120 60 Sales and cost of sales 'Cost of sales are the costs directly related to the purchase or production of whatever the company sells'. ...read more.

Middle

If the item Alumwell Motor's buy is used partly for the business and partly for personal use, they must only record the proportionate cost. For example, if the business buys a PC for �500 and they use it only half of the time for business, they should record the cost as �250 and make a note on the supplier's invoice when you file it. Current assets - with brief descriptions of stock, debtors, bank balance Alumwell Motor's will have a balance sheet item which would equals the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year. The business creditors will often be interested in how much that company has in current assets, since these assets can be easily in debt in case the company goes bankrupt. In addition, current assets are important to most companies as a source of funds for day-to-day operations. Long-term liabilities Long term liabilities are those that are due to be paid in more than a year. Those due in less than a year or on demand are current liabilities. The most important type of long term liability would be for Alumwell Motor's is debt. ...read more.

Conclusion

Describe Business valuation The purpose of the balance sheet is that Cheang Motors can see what are the fixed assets, current assets, stock, debtors, bank balance, current liabilities, creditors, bank overdraft, net current assets, less long-term liability- bank loan, financed by, share capital retained profits, all these costs are not this sheet because they see how much money is being spend on all them in 2006 and 2007. Through this they will be able to see how much the company is valued at. The balance sheet is a record of a company's assets and liabilities -- in short, what it's already got or expects to get soon, and what it owes to others. Shareholder value ultimately comes from liquid assets, assets that can easily be converted into cash. The amount of liquid assets a company can amass ultimately determines its value. A business will be able to use this information and use it for the next year and try and better it. By looking at the above Balance sheet, you will get an idea of what the business is valued at. It shows that the Fixed assets have gone up from 2006 (�110,000) and 2007 (�115,000). The liabilities have also seen an increase in the two years. This obviously shows money coming in and out and what the business owns and what it owes. This then shows the value of the business. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level ICT in Business section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level ICT in Business essays

  1. I have selected a nursery because there is high demand in the UK as ...

    This is because he has good credit rating with the bank and can obtain a loan for my business. BUSINESS & OBJECTIVES BUSINESS NAME Jingle Bells ADDRESS Uxbridge Road, Ealing W 13 LEGAL STATUS Private Limited Company Its advantages are: * Limited liability will be there. * Control is maintained.

  2. The purpose of this document is to define the Context of Cain Motors Information ...

    Process That which must be done to bring about a particular outcome, in terms of information to be gathered, decisions to be made and results that must be achieved. Producer This role represents the creator(s) of a product that is the subject of a quality review.

  1. Implementation of ATMS at SBI. Banks in India are looking at deploying biometric ATMs ...

    * Location: The target for installation of ATMs for each financial year is finalized for State Bank group as a whole. In respect of the location of ATMs Associate Banks are required to coordinate with the Local Head Office concerned to avoid bunching of State Bank group ATMs.

  2. unit10 final account

    if any of the shareholder dies the business still continues. THE MAIN INDUSTRIAL SECTORS 1. THE PRIMARY SECTOR: This involves the extracting of raw materials from earth, such as oil; and growing foods and other crops. 2. THE SECONDARY SECTOR: This involves manufacturing of goods and semi-finished goods; such as

  1. Will it make a Profit?

    It would also enable me to set budget targets for myself spending. I will need to analyse issues such as the break even point, so I know exactly at which point the amount I spend is equal to the amount of income I get coming in, even though I won't be making a profit.

  2. The two businesses that I have chosen for my investigation are Shell Ltd and ...

    a specified area The liabilities at Shell: * Business success is dependent on the skill of the franchisee and the strength and dependability of the franchisor. If either are lacking the business may fail * Longer hours and fewer holidays * The franchisee is dependent on the popularity of the

  1. Associated Industries Limited also known as AINLIM is one of the larger trading companies ...

    on the organisation. The results can then be used to take advantage of opportunities and to make contingency plans for threats. Pest Model Political Factors The political factors have a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses.

  2. The activities of Chelsea Village I have discussed the stadium and the other ...

    The overall hotel has an excellent service and entertainment opportunities. This modern hotel has rooms for contemporary style, and a new executive lounge. On-site parking for 180 cars is also available. There is an underground nightclub adjoined to the stadium it self it is called the 'Purple Nightclub' it has

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work