Managing Financial Resources and Decisions Assignment 2 BTEC Nguyen Huu Phong 2017

Managing Financial Resources and Decisions Assignment 2 BTEC Nguyen Huu Phong 2017 tại University of Greenwich Viet Nam, đây là một trong những môn rất quan trọng và cần thiết cho những người muốn theo nghành businness cụ thể là human resource management như mình. Bài assignment này được mình làm tại trường. Các bạn có thể xem và tham khảo nhưng lư

ASSIGNMENT FRONT SHEET Qualification BTEC Level HND Diploma in Business Unit number and title H/601/0548: Managing Finance Resources and Decisions Assignment due Assignment submitted Learner’s name Dương Thừa Phát Assessor name Trương Ngọc Thịnh Learner declaration: I certify that the work submitted for this assignment is my own and research sources are fully acknowledged Learner signature Date Grading grid P4.1 P4.2 P4.3 Assignment title P4.4 M1 M2 M3 D1 D2 Evaluate Financial Performance D3 In this assignment, you will have opportunities to provide evidence against the following criteria Indicate the page numbers where the evidence can be found Assessment criteria Expected evidence Task no LO4 Be able to evaluate the financial performance of a business Financial statements: Basic form, 4.1 Discuss the main structure and purpose of main financial statements ie balance financial statements sheet, income statement, cash flow statement How different types of finance 4.2 Explain the impact of and their costs appear in the finance on financial financial statements of a statement business; the interaction of assets and liabilities on the balance Distinctions between different 4.3 Compare appropriate formats of financial statement formats of financial fordifferent types of businesses ie statements for different limited company, sole trader types of business 4.1 4.2 4.3 Assessor’s Feedback 4.4 Interpret financial statements using appropriate ratios and comparisons, both internal and external Assessment criteria Merit descriptor No (M1) Merit descriptor No (M2) Merit descriptor No (M3) Distinction descriptor No (D1) Distinction descriptor No (D2) Distinction descriptor No (D3) Key accounting ratios for profitability, efficiency and investment; comparison both external ie other companies, industry standards and internal ie previous periods 4.4 Expected Evidence Feedback (note on Merit/Distinction if applicable) Identify and apply strategies to find appropriate solutions Select/design and apply appropriate methods/techniques Present and communicate appropriate findings Use critical reflection to evaluate own work and justify valid conclusions Take responsibility for managing and organizing activities Demonstrate convergent/ lateral/ Creative thinking Summative feedback Assessor’s Signature IV Grading Check: Date Comments if any: Agree Disagree Modify grade to IV Signature Date Contents Introduction LO4 Be able to evaluate the financial performance of a business 4.1 Discuss the main financial statements 4.2 Explain the impact of finance on financial statement 10 4.3 Compare appropriate formats of financial statements for different types of business 11 4.4 Interpret financial statements using appropriate ratios and comparisons, both internal and external 12 Conclusion 18 References Introduction Any business in the market when it comes to operations and development when it comes to outside capital needs to disclose information about the situation, growth, and development of that business A specific financial report In this report, I will detail the corporate financial statements and how important it is to a business LO4 Be able to evaluate the financial performance of a business 4.1 Discuss the main financial statements In this section, I will introduce related articles in financial statements such as Income statement, Balance sheet, and Cashflow statement I will detail each of the items below Financial statements record all activities of a business, its development, and growth The analysis of financial statements helps us to understand whether a business is performing well, the analysis of financial statements enables investors to make the decision whether to invest or to withdraw from the business before the business down or not As mentioned above, the basic financial statement will have three main parts: Income statement, Balance sheet, Cashflow statement Income statement The income statement is a measure of the performance of a business over a specified period of time, which is up to the fiscal year Through the income statement, we can see the profit or loss of that business Here is an example of what an income statement looks like and includes: (education.howthemarketworks.com, 2016) This report includes key elements such as revenue, financial expenses, selling expenses, income tax and other revenues Income statements are used to evaluate whether a business is doing well and making a profit, and of course it is published quarterly or fiscal year From the income statement, evaluators can analyze the change and growth of that business in the field of business On the other hand, they also calculate dividends and profit margins that investors earn when the company is profitable Balance sheet The balance sheet includes the assets, liabilities and equity of an enterprise The balance sheet will indicate the financial status and economic resources of an enterprise, based on which it can assess the amount of the business loan The balance sheet follows the formula: Assets = Liabilities + Equity (myaccountingcourse.com, 2016) Assets are what a business owns and are usually measured in cash There are two types of assets that are long-term assets and short-term assets Long-term assets include long-term investments such as bonds, real estate, buildings, facilities, machinery, etc In addition, long-term assets may include knowing- Formula secret or patent, the brand of a business Short-term assets include assets that will be sold, transferred to cash and can be used to liquidate shortterm liabilities Specific short-term assets include cash, receivables A liability is considered a debt of a business Debts include short-term and long-term loans, more specifically, wages, taxes, loans from outside Equity is the number of assets that the owner of the business, the shareholder contributing to the company, and the equity can be called "net assets." Income is reinvested in the business or used to pay off debt, then it is distributed to shareholders under their holding, which is called dividends Cashflow statement Cashflow statements are reports that a business must report to authorities and the public The cashflow statement evaluates an enterprise's cash flow by three main activities, investment and financing Cashflow statements help to point out information that can help assess the quality of your business's income, liquidity, and liquidity (myaccountingcourse.com, 2016) 4.2 Explain the impact of finance on financial statement According to Investopedia stated that: "Interest expense is the cost incurred by an entity for borrowed funds Interest expense is a non-operating expense shown on the income statement It represents interest payable on any borrowings – bonds, loans, convertible debt or lines of credit." Cost of goods sold (COGS) are the direct costs attributable to the production of the goods sold by a company This amount includes the cost of the materials used in creating the good along with the direct 10 labor costs used to produce the good It excludes indirect expenses such as distribution costs and sales force costs Beside that, according to Investopedia state that: "A tax expense is a liability owing to federal, state/provincial and municipal governments Tax expenses are calculated by multiplying the appropriate tax rate of an individual or business by their income before taxes, after factoring in such variables as nondeductible items, tax assets and tax liabilities." The capital of an enterprise usually consists of two sources, the owner's capital and the source of capital, or debt It is indispensable for a business to combine both equity and equity However, balancing these two types is also a necessity and flexibility in each period If an enterprise owes too much debt, it will lead to higher debt, higher interest expenses and an impact on profitability in the statement of income The highinterest expense will greatly affect the net revenue of the business to pay a large proportion of interest expenses On the other hand, the high-interest expense will cause the amount of cash to fall and the revenue from the business result will also decrease Capital expenditures have a large impact on the balance sheet and are influenced by the source of business use The basic thing is that when the cost of sales is lower and the cost of capital is not balanced, the business will suffer a certain loss This is a negative situation when it affects both the ability to pay the charges and interest expenses, debts of that business Taxation is a mandatory requirement that any business must be obliged to pay to governments in the countries in which it operates The tax is calculated based on the net income of a business and does not affect the debt This is the point where so many companies around the world are spilling billions of dollars in taxes like Google, Apple, Facebook, etc These businesses usually borrow money from outside to invest, even though their finances are big The main purpose is to avoid too high taxes when their revenue is too large 4.3 Compare appropriate formats of financial statements for different types of business Definition Sole Traders Partnerships A sole trader is the simplest form of business structure and is relatively easy and inexpensive to set up As a sole trader you will be legally responsible for all aspects of the business You’ll generally make all the decisions about starting and running your business and you can employ people A type of business organization in which two or more individuals pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement 11 Advantages and disadvantages Formats of financial statements As a small business, organizational structure is simple and easy to manage The initial investment cost is not high and the number of employees is low, so the salary cost is low Most importantly, control and decision making in the enterprise category is much easier, often led by the founder Business activities are limited by the owner's capital Problem solving ability is not high due to concentration in one person All responsibilities are concentrated on the owner and the personal income tax is higher than the larger corporate tax Since only a business owner establishes and owns the business owner's capital, business income is considered income of the business owner This tax will not be counted as corporate income tax but will be charged as personal income tax The weak point is that personal income tax is higher than corporate income tax Flexible capital is a big strength when many people contribute capital The ability to solve problems is higher due to the mutual support between the capital contributors The amount of work spread and reduced the pressure, not focusing on too many people Disagreement is a huge limitation of this type of business In addition, profit is a sensitive issue as there are many contributors and are often not clearly divided Financial statements of this type of business will be evaluated as financial statement for the enterprise as this type of enterprise has higher number of members 4.4 Interpret financial statements using appropriate ratios and comparisons, both internal and external In this section, I will analyze the specific financial statements of a business so that we can see the growth, growth and business of that business through multiple quarters The group I am analyzing in this section is Apple Tech giant and being the most valuable corporation in the world at just $ 810 billion in May 2017 Apple was founded by Steve Jobs and Steve Wozniak in 1976 and is currently led by CEO Tim Cook based in Cupertino, California Reported business operating results over the quarterly 12 Income Statement 13 Balance sheet 14 Cashflow Statement Looking at Apple's financial statements for the last three-quarters is the first quarter of 2017 and the fourth quarter of 2016, we can see that Apple's revenue tends to rise extremely strong in the first quarter of 2017 and quarterly The return to the average is slightly higher than the fourth quarter of 2016 Originally, this may have been due to the fact that it sold its latest iPhone, the iPhone 7, and the huge consumer demand that led to strong sales Q4 / 2016: Revenue of $ 46 billion and profit of $ 17 billion Q1 / 2017: Revenues reach $ 78 billion and profits reach $ 30 billion This is the quarterly sale of the latest iPhone / 7plus and the purchasing power is too great Q2 / 2017: Revenue is only $ 52 billion and profit is $ 20 billion In general, Apple's business is growing quarter by quarter and has spiked to new quarter sales Apple's current business situation is very good 15 Earnings per share According to Investopedia stated that: “Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock Earnings per share serves as an indicator of a company's profitability.” Calculated as: 16 In this formula, dividend per share (DPS) is the total dividends paid out over a whole year (including dividends but not including special dividends) divided by the number of outstanding ordinary shares issued Average Outstanding Shares can be the average number of shares in circulation or the number of shares outstanding at the end of the year Q4/2016: (9.014x0,00228)/5.214 = 0,0039 Q1/2017: (17.891x0,00228)/5.214 = 0,0078 Q2/2017: (11.029x0,00228)/5.214 = 0,0048 We can see in the quarter, the earnings per share Apple is uneven and the highest is still Q1 / 2017 Price-Earnings Ratio According to Investopedia stated that: “The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings The price-earnings ratio is also sometimes known as the price multiple or the earnings multiple.” Calculated as: The price-earnings ratio (P/E ratio) = Market Value per Share / Earnings per Share Q4/2016: 113/0,0039 = 28,9 Q1/2017: 155/0,0078 = 19,87 Q2/2017: 143/0,0048 = 29,7 Apple's Price-Earnings Ratio continues to rise sharply in Q1 / 2017 and decline in Q2 / 2017 growth Return on Assets Ratio – ROA According to Investopedia stated that: "Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets ROA gives an idea as to how efficient management is at using its assets to generate earnings Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage Sometimes this is referred to as "return on investment"." 17 Calculated as: Return on Equity ratio (ROE) According to Investopedia stated that: "Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested." Calculated as: Looking at the table above, we can see that Apple's ROA and ROE are always sharply increased in Q1 / 2017 (ROA of 5.4% and ROE of 13.5%) and then fall in Q2 / 2017 Growth and till higher than Q4 / 2016 This is a good sign that Apple's business is very good, and revenue is a big part of it Conclusion Through this report we can see how important financial statements are for a business and on which we can assess the business situation, the level of growth and development of the business Karma to make the right investment decision 18 References • Aaplinvestors (2017) Sales & Income, Aaplinvestors.net, [online] Available at: http://aaplinvestors.net/stats/salesincome/ (Accessed June 2017) • Brookshire, M (2017) Income Statement Definition and Example, HowTheMarketWorks Education Center, [online] Available at: http://education.howthemarketworks.com/glossary/income-statement/ (Accessed June 2017) • Google Finance (2017) Financial Statements for Apple Inc - Google Finance, Google.com, [online] Available at: https://www.google.com/finance?fstype=ii&q=nasdaq:aapl (Accessed June 2017) • Myaccountingcourse (2017) Balance Sheet | Example | Template | Format, My Accounting Course, [online] Available at: http://www.myaccountingcourse.com/financial-statements/balance-sheet (Accessed June 2017) • Myaccountingcourse (2017) Statement of Cash Flows Direct Method | Format | Example, My Accounting Course, [online] Available at: http://www.myaccountingcourse.com/financial-statements/cash-flow-statement-direct-method (Accessed June 2017) • Smallbusiness (2017) Sole Trader | Small Business, Smallbusiness.wa.gov.au, [online] Available at: https://www.smallbusiness.wa.gov.au/business-advice/business-structure/sole-trader (Accessed June 2017) • Staff, I (2017) Cost Of Goods Sold - COGS, Investopedia, [online] Available at: http://www.investopedia.com/terms/c/cogs.asp (Accessed June 2017) • Staff, I (2017) Earnings Per Share - EPS, Investopedia, [online] Available at: http://www.investopedia.com/terms/e/eps.asp (Accessed June 2017) • Staff, I (2017) Interest Expense, Investopedia, [online] Available at: http://www.investopedia.com/terms/i/interestexpense.asp (Accessed June 2017) • Staff, I (2017) Price-Earnings Ratio - P/E Ratio, Investopedia, [online] Available at: http://www.investopedia.com/terms/p/price-earningsratio.asp (Accessed June 2017) • Staff, I (2017) Return On Assets - ROA, Investopedia, [online] Available at: http://www.investopedia.com/terms/r/returnonassets.asp (Accessed June 2017) • Staff, I (2017) Return On Equity - ROE, Investopedia, [online] Available at: http://www.investopedia.com/terms/r/returnonequity.asp (Accessed June 2017) • Staff, I (2017) Tax Expense, Investopedia, [online] Available at: http://www.investopedia.com/terms/t/tax-expense.asp (Accessed June 2017) • Ycharts (2017) Apple Shares Outstanding (AAPL), Ycharts.com, [online] Available at: https://ycharts.com/companies/AAPL/shares_outstanding (Accessed June 2017) 19