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Business Studies Level 3 Btec Unit 2 P5

2459 words - 10 pages

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P5 - Interpret the contents of trading, profit and loss account and balance sheet for a selected company.
In this assignment I will be interpreting the contents of the trading and profit loss account of Marks and Spencer’s and their balance sheet. I will then give my opinion on how well the might look to shareholders in the business.
Scenario
Marks and Spencer’s Finance Manager is attending the AGM set for the shareholders and other stakeholders next week. He has asked you to produce a presentation to address the stakeholders for Marks and Spencer’s.
Why is a trading, profit and loss account important?
A trading and profit loss account shows ...view middle of the document...

7 billion. From this they can then calculate things such whether a businesses is making a profit or a loss.
Operating Profit
Operating profit, also known as net profit, is the profit made as a proportion of sales revenue. It is essentially the difference between the businesses gross profit and expense. Businesses do this in order to find out and determine how much of your earnings can be distributed to business owners and shareholders. From this we can see that their calculated operating profit is £694.5. This means that Marks and Spencer’s have £694.5 million to distribute via dividends to shareholders and business owners.

Gross Profit
Gross profit is essentially sales or revenue minus the cost of goods sold. This includes the cost associated with the production and selling of good or services depending on the business. In the case of M&S it is the money that have left after the deduction of the cost for the making the products that they have sold within the year of the trading, profit and loss account and the balance sheet. These products could include the making and selling of clothing items and footwear. Having a gross profit figure allows Marks and Spencer’s to find out how easy it pay off different liabilities. If Marks and Spencer’s can increase sales and avoid increasing expenses, the business as a whole will receive a larger amount of profit after taxes and other liabilities are paid.
Balance sheet
Why is a balance sheet important?
A balance sheet is one of several major financial statements you can use to track spending and earnings. Also called a statement of financial position, a balance sheet shows what your company owns and what it owes through the date listed, as Accounting Coach stated. It displays this information in terms of your company's assets, liabilities, and equity. Balance sheets are critical documents because they keep business owners like you informed about your company's financial standing.
Long-term assets are ones the company reckons it will hold for at least one year. Typical examples of long-term assets are investments and property, plant, and equipment currently in use by the company in day-to-day operations.
Long-term assets are ones the company reckons it will hold for at least one year. Typical examples of long-term assets are investments and property, plant, and equipment currently in use by the company in day-to-day operations.
Non – Current Assets
Current Assets
Current assets are short term resources that the business owns and can sell as a source of short term finance and support the business in many ways. For example if the company is in debt to their suppliers, they are able sell those current assets instead of taking actual money as it could disrupt cash flow in the business.
Current Liabilities
Current liabilites are short term debts that the business ows and can range from tax and loans to owing suppliers, partners and shareholders. In order for a debt to be a current liability it must be...

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