Financial Statements Antecedents Banking Sector

Questions: Happy runs a successful and growing small business at Greenwich, as a sole trader in child wares, since 2000 with an average annual turnover of 500,000. She wishes to expand the business by acquiring a small private limited company in the same line. The company is located at North London and is presently distributing childrens cloths. The private limited company was established in the year 2010.The annual turnover of the company is one million. After the acquisition she intends to run the two businesses as if they were one operation making no distinction between them. You are required to: 1. Identify and list the stakeholders of the sole trader business. 2. Identify and list the stakeholders of the private limited company. 3. Classify the identified stakeholders of both organisations into: a) Internal stakeholders. b) Connected stakeholders. c) External stakeholders. 4. Identify the stakeholders who have high level of interest and high level of power (key players) in both organisations and suggest suitable methods of communication with them. Answers: Profit and loss statement The purposes of profit and loss statements are given below: Revenue Projection Profit and loss statement delivers the revenue generation capability for a business in future by comparing the financial position of the present and past scenario (Iqbal and Iqbal 2015). An organization is able to find the financial status and profit earning capability and according to that future decisions are taken with the help of PL statement. Expense Forecast The projections for future expenses are carried out with PL statement. The most common expenses of an organization are salaries, building rent, equipment purchases and overhead costs (Jacek Welc 2015). For a small business, expenses are prone to rapidly increase, which can be identified by PL statement. Bottom Line This is the common phenomenon that whenever an organization exceeds in revenue against its expanses, it generates profit and vice versa. PL statement helps an organization to find out certain areas where an organization can cut costs and increase its revenue (Kozlovska 2015). Investor attraction Whenever decision regarding choosing of fund-venture originates, PL statement helps in giving supportive data to the investors. If an organization is able to show that it will earn profit with certain amount of investment, then surely investors will be attracted so that more return is achieved (Lowe and Tinker 2015). Thus, with the PL statement, investors get the clear picture of an organization process and operations and the possible return that they will receive. PL statement draws the investment motive that strengthens the financial capability of a business. Financial Position Statement The purposes of Financial Position Statement are given below: Financial Condition Financial stakeholders such as investors, capital providers and creditors solely rely on Financial Position Statement of an organization (Mai Thi Hoang Minh 2015). The creditors are able to know where their money was invested and where their money is at present and according to that future decision is taken by them Operating Results The snapshots of organizations equity, liability and assets are shown in the balance sheet, which represents its financial position (Sudana 2015). The operating results concerns the investors regarding how far they need to invest so that desired return is received. Cash Flows The accounting income is reflected in the income statement of an organization. The cash exchanges, cash inflows and outflows are reflected on the Financial Position Statement. Non-operating activities like financing and investing are reflected through Financial Position Statement, which helps an organization to identify and quantify the areas where expenses need to be restricted in future (Tkachenko 2015). Shareholders Equity Shareholders equity statement helps in showing various equity component changes, which includes earning that are retained for a particular period. Through increased retained earnings, growth in companys shareholders retained earnings is increased, which is projected in financial position statement for an organization (Iqbal and Iqbal 2015). Cash Flow Statement The purposes of Cash Flow Statement are given below: Sources of Cash Cash Flow Statement helps in identifying the bases from where cash inflows are generated within a stipulated period of time in an organization (Jacek Welc 2015). The various activities where cash was utilized are even displayed. Poor cash planning and balanced maintenance between cash inflow and outflow is recorded though Cash Flow Statement. Firm Efficiency The efficiency of a firms operation in generating the cash inflows through regular operations is projected though cash flow statements. The various usage of cash for long term activities of an organization is figured out by cash flow statement, though which it comes to know about resource allocation (Kozlovska 2015). Cash Receivable The amount of cash received in a period is identified by Cash Flow Statement, which includes long term loan, debentures and issue of shares. Various capital investment programs are appraised by Cash Flow Statement, which helps in determination of viability and profitability (Lowe and Tinker 2015). Sustainability and integrated reports Integrated report about value creation overtime containing relevant information is formed in integrated reports. Such reports help on organization in forming decision making consideration in future. Historical data is compared with present data and finally certain decisions are taken. Integrated reports contain structured information and financial data that builds up the decision making considerations for an organization (Mai Thi Hoang Minh 2015). The main purpose of such reports is to identify how an organization can be extended in future with the help of its stakeholders. Reference List Iqbal, S. and Iqbal, N., 2015. Financial Reporting Regime Financial Statements Antecedents Banking Sector Case of Pakistan.ILSHS, 59, pp.126-130. Jacek Welc, 2015. Full-Goodwill Method of Accounting for Business Combinations and Quality of Financial Statements.Journal of Modern Accounting and Auditing, 11(11). Kozlovska, I., 2015. The impact of long-lived non-financial assets depreciation/amortization method on financial statements.Copernican Journal of Finance Accounting, 4(2), p.91. Lowe, T. and Tinker, T., 2015. Information content of financial statements, financial plans, and MCS: an integration.IJCA, 7(5/6), p.427. Mai Thi Hoang Minh, 2015. Information on Financial Statements for Loan Decision-Making of Commercial Banks in Vietnam.Journal of Modern Accounting and Auditing, 11(2). Sudana, I., 2015. Sustainable Development and Reconceptualization of Financial Statements.Procedia - Social and Behavioral Sciences, 211, pp.157-162. Tkachenko, V., 2015. Features of Formation and Evolution of Financial Statements: National and World Experience.Financial and credit activity: problems of theory and practice, 2(19), p.68.