Tma 03 B120

TMA 3 1a. Peters Profit and Loss chronicle 1B) The Purpose of a Profit and Loss account A profit and loss account is intended to show a companies income and expenditures and calculate the companys net profit or loss based upon the dissimilitude between those figures. It must be remembered that this is a period of conviction being measured and it doesnt show monthly fluctuations. It is extremely useful in determining past performance and to provide and predict future results. It enables Peter to see what changes would have implications on his profit, both a rise in sales and a decrease in expenses and allows one and only(a) to set targets accordingly. Without it, it might not be obvious that in Peters parapraxis a reduction in overheads would have a too large effect on his profit. From the profit and loss account created supra for Peters commercial enterprise, we can deduce several conclusions roughly his unwavering. The obvious controversy made is that Peters firm is devising a profit. This is what almost every business strives to get through in most circumstances. However we can learn more than from the statement than just whether the firm is making a profit.

The statement displays Peters expenses and allows us to consider those and see intelligibly where his largest expenses are, this could be extremely useful in trying to indentify the quick areas to focus on when trying to save on expenses. It in any case allows us to deduce his actual profit margin, which is nigh 40%. This could be useful to an investor or lender as it allows one to consider Peters vulnerability to market fluctuations in price and costs. We can see (only simply as in that respect are greater considerations to make) that Peter has a reasonable buffer storage, if he had to reduce sales prices or suffer an change magnitude cost of sales; he could absorb some without making a loss. You can also consider the size of the business and the number of its employees, with expenses for wages at 304,000 GBP the company probably has around 10 employees (presuming around 30k as a... If you want to get a full essay, order it on our website: Ordercustompaper.com

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