Explain with examples these activities in private firms

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Reference no: EM13341217

QUESTION 1

Answer the following question using an essay format with a maximum that ranges between 300 to 500 words for each question.

a)   There are three main forms of firm's ownership, sole proprietorships, partnerships and corporations in business organizations. Identify and explain these forms in private firms.

b)   There are three types of activities (operating, financing and investing) generate funds to the organization. Identify and explain with examples these activities in private firms

QUESTION 2

The following Balance Sheet and Income Statement are taken from the accounts of Gulf Corporation for wholesale carpet business. Answer the following question with establishing table for comparison between the financial position of the company in 2012 and 2013 and a report for your decision

Required

1.   Use the above Income Statement and the Balance Sheet to assess:

A.    Liquidity ratios

B.     Gearing ratio

C.    Efficiency ratios

  • Inventory turnover period
  • Settlement period for trade receivables

D.   Profitability ratios

  • Return on ordinary shareholders' funds
  • Return on capital employed
  • Operating profit margin
  • Gross margin profit

E.    Investment ratio

  • Earnings Per Share (EPS)

2.   The company is applying for a bank loan. The bank manager seeks your advice on whether to lend the company in a form of a report. Base your report on the above results.

Statements of Financial Position (balance sheets) of Gulf Cooperation for wholesale carpet business as at 31 March 2013

 

2013

2012

Assets

 

 

Non-current assets

 

 

Plant and equipment (at cost less depreciation)

8000

5000

Land and buildings

4000

3000

Fixtures and fittings

12000

8000

 

 

 

Current assets

1000

500

Inventories

1500

1000

Trades receivable

500

500

Cash at banks

3000

2000

 

15000

10000

Total Assets

 

 

Equity and liabilities

 

 

Equity

5000

4000

$ 0.50 ordinary shares

3000

2000

Retained earnings

8000

6000

 

 

 

Non-current liabilities

3000

2000

Borrowing

 

 

Current liabilities

2500

1500

Trade payables

1000

500

Taxation

500

0

Short-term borrowings (all bank overdraft)

4000

2000

 

15000

10000

Total Equity and Liabilities





 

Profit and Loss Accounts for the year ended 31 March 2013

2013

2012

 

8000

5000

Sales

6000

3000

Cost of sales

2000

2000

Gross profit

1000

1000

Operating expenses

1000

1000

Operating Profit

200

250

Interest payable

800

750

Profit before tax

100

100

Taxation

700

650

Profit for the year

 

 

Reference no: EM13341217

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