Unit 2: Resources (P5, P7, M3, D2, D1)
Unit 2: Business Resources
P5
Is The Business Profitable?
The closing capitals for both years are very similar and propose that not only is the business very profitable but it is also maintaining its financial position within the market. In 2011 the closing capital was £2,500,000 and for 2012 the closing capital was £2,425,000. This is interesting because as a business progresses you would think that the closing capital would increase not decrease although this is not too large a decrease when compared with the general current financial instability and the number of businesses which are struggling to stay afloat.
The gross profit would also suggest that both years were profitable but with a decrease from £1,000,000 for 2011 to £740,000 for year 2012.
The Net Profit for 2011 is £370,000 which seems reasonably high although this cannot be confirmed since there is no information from previous years to compare this to. So this could suggest good profits but cannot be sure as we do not know what the organisations ideal profit is, for 2012 it is £7,000 showing a huge decrease and fewer profits compared with the previous year.
Is The Business Liquid?
In 2011 the business is very liquid as their stock levels are low at £5,000 which means more money in cash than in stock this is good because stock is harder to turn into cash. They will also have money coming in from debtors at £105,000 and they have a large sum of available money in the bank at £60,000. From the cash availability it shouldn’t be too hard to expand the business or pay back current liabilities such as creditors at £50,000 for 2011 and £40,000 for 2012.
XYZ Ltd.’s stock was at £55,000 in 2012, this is a lot of money to have in stock which isn’t very liquid as it takes longer to sell and turn into cash. The debtors have gone down from £105,000 in 2011 to £60,000 in 2012; this is good for the business to get more of their money in and should mean that they have more money in the bank. Their money that was in the
P5
Is The Business Profitable?
The closing capitals for both years are very similar and propose that not only is the business very profitable but it is also maintaining its financial position within the market. In 2011 the closing capital was £2,500,000 and for 2012 the closing capital was £2,425,000. This is interesting because as a business progresses you would think that the closing capital would increase not decrease although this is not too large a decrease when compared with the general current financial instability and the number of businesses which are struggling to stay afloat.
The gross profit would also suggest that both years were profitable but with a decrease from £1,000,000 for 2011 to £740,000 for year 2012.
The Net Profit for 2011 is £370,000 which seems reasonably high although this cannot be confirmed since there is no information from previous years to compare this to. So this could suggest good profits but cannot be sure as we do not know what the organisations ideal profit is, for 2012 it is £7,000 showing a huge decrease and fewer profits compared with the previous year.
Is The Business Liquid?
In 2011 the business is very liquid as their stock levels are low at £5,000 which means more money in cash than in stock this is good because stock is harder to turn into cash. They will also have money coming in from debtors at £105,000 and they have a large sum of available money in the bank at £60,000. From the cash availability it shouldn’t be too hard to expand the business or pay back current liabilities such as creditors at £50,000 for 2011 and £40,000 for 2012.
XYZ Ltd.’s stock was at £55,000 in 2012, this is a lot of money to have in stock which isn’t very liquid as it takes longer to sell and turn into cash. The debtors have gone down from £105,000 in 2011 to £60,000 in 2012; this is good for the business to get more of their money in and should mean that they have more money in the bank. Their money that was in the
References: [1] Business Level 3 Book 1 (Bevan, Coupland-Smith Dransfield, Goymer, Richards) [2] Class Notes/Hand-Outs