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Finance Management

Finance Basics: The Basic Links (B)

 

 


Business Links

 

What are the basic financial links? What does the profit & loss statement shows?

 

Posted: Apr 2009


THE BASIC LINKS

In order to have the basic business links we need:

•  the basic financial statements to be computed

•  the profit & loss statement, cash flow statement and balance sheet are linked.

 

THE PROFIT & LOSS STATEMENT

Shows:

•  sales revenue or turnover made during the period and

•  the costs associated with those sales.

Profit & Loss Statement

 

HE CASH FLOW STATEMENT

Cash end of previous period = Cash beginning of the period

Cash at the beginning of a period:

+  Cash in      (all cash received during the period)

-   Cash out    (all cash paid out during the period)

=  Cash at the end of the period

 

THE BALANCE SHEET

It is drawn up at the end of the period, after all transactions have taken place;

Therefore, profit & loss and cash flow statements must be calculated before completion of the balance sheet.

Profit is:

• owed to the shareholders,

• a source of company funds

 

Balance Sheet


Business Case Study

Business Case Study

 

DAY ONE

JS can buy a box of sandwiches from fast food chain for $70. The box contains 20 ham and cheese sandwiches.

JS borrowed the sales stand from his friend.

JS buys one box of sandwiches and sells them for $5 per sandwich. Within an hour he has emptied the box.

Business Finance

 

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