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Task 1
a) Financial statement analysis
Profit and loss account
Profit and loss statement Saturn Ltd for the year ended 31 March 2022
Particulars
2022 (£)
Net sales
95500
Cost of sales
62561
Gross margins
32939
Other operating expenses
Administrative expenses
6560
Total operating expenses
6560
Operating income
Dividend receive
750
Interest receive
150
Share premium
2000
Revaluation surplus
5000
Total operating income
7900
Net income
1340
Table 1: Profit and loss statement
Profit and loss account is a financial statement which is calculated companies' net earnings in a financial year. The profit and loss statement of Saturn Ltd has computed the total income in the financial year of 2022, which is almost £1340. Total operating expenses which is nearly £6560 while the gross margin is nearly £32939. The selling and administrative expenses are nearly £6560 and the cost of sales is nearly £62561 which is compared by the net sales of Saturn Ltd. Total revenue, as well as total expenses of Saturn Ltd, is calculated by the income statement and net income of the business also calculated by the profit and loss statement. A profit and loss statement summarizes the company's financial records after identifying total revenue and cost (Roška et al. 2019). A profit and loss statement is mandatory to calculate company’s total revenue in a fiscal year.
Balance sheet
Balance sheet Saturn Ltd for the year ended 31 March 2022
Particulars
2022 (£)
Assets
Bank
£ 750
Current assets
Short term investment
£6500
Trade receivable
£26189
Plant and equipment
£2000000
Land
£289061
Total assets
£2322500
Liabilities
Trade payable
£8675
Taxable charges
£2290000
Dividend payable
£8675
Interest
£150
Ordinary share capital
£15000
Total liability
£2322500
Total equity
Revaluation surplus
£5000
Retained earning
£5175
Loan repayable
£10000
Total equity
£20175
Total liability and equity
£2342675
Table 2: Balance sheet
A balance sheet is the financial statement of Saturn Ltd which compares companies' financial performance after identifying total assets and liability. Total assets are almost £2322500, which is calculated by the short-term investment, trade receivable which is nearly £6500, and £26189. Financial statement analysis compares the financial performance of a business after calculating total assets and liabilities. Total liability and equity which is almost £2342675 are calculated by the balance sheet of Saturn Ltd. An economical snapshot of the business organization is calculated after identifying the current assets and liabilities of the business organization (Albanese et al. 2021). Most business organizations prepare financial statements to identify the financial position of a business.
Business investors and owners prepare financial statements to recognize the financial health of the business. Individual financial activities of the organization are calculated by the financial statement analysis. Two important financial statements are mandatory to compare the financial performance of Saturn Ltd. Prot and the loss statement also known as the income statement which calculates the net income of Saturn Ltd which is almost £7900. The operating expenses, as well as the net income of the business, are calculated by the financial performance. Subtracting total cost as well as the total income is easily monitored generated revenue of the business (Huo et al. 2018). The gross profit of the business organization is calculated by the income statements of the business.
b) IASB conceptual framework
Financial performance is prepared or approved by superior methods which are necessary to calculate the financial statements of the business. According to the financial statement, Saturn Ltd compared total assets and liabilities are compared by the financial statements. According to IASB conceptual framework financial performance are necessary to identify companies' financial health. A conceptual framework is a visual representation and develops the relationship among the variables. The fundamental concept of IFRS helps to ensure the financial reporting concept (Kabir and Rahman, 2018). Most business organizations are comparing financial performance by the IFRS standard board which is necessary to establish basic principles of future scope. IASB's conceptual framework states that to meets the definition of assets, liability, or equity.
In order to recognize the financial position of the company, the experiential learning process is important and is to develop the educational design. The major purpose of the IASB framework is to develop future activities which are necessary to review the financial performance of the business. In order to, a review of existing accounting standards ensures consistency across the standard which represents the visualization of activities related to a fiscal year (Van Mourik and Katsuo Asami, 2018). The IASB conceptual framework is composed of basic objectives and fundamental concepts which are necessary to identify the compatibility of business. A visual representation, as well as taxonomy, is included in the conceptual framework of IASB which identifies organizational potential elements by the qualitative characteristics. In order to assumptions about the IASB framework is necessary to underlying financial statements is going concerned.
Current development
The general purpose of the objectives and purpose of the financial reporting is to identify qualitative characteristics which are necessary to identify each reporting entry. The financial performance of the business is compared to the IASB policies which are necessary to recognize numerous elements of financial statements (Alexander et al. 2019). Presentation and disclosure of each financial activity are measured by the IASB policies which are important to achieve sustainable business performance. A conceptual framework of IASB is based on the actual basis which is to measure the units of purchasing power of each unit (Zavadskas et al 2018). There is some basic difference between GAAP and IFRS which is generally accepted by financial practices. There are basic rules of IFRS which is IAS issued international accounting standard board which is develop the relationship between ideas and knowledge.
There are four important assumptions of financial accounting which is to compare each entry to identify the financial activities of each year. Financial accounting measures each activity of the business and IASB approves IFRS to operate under the oversight of the IFRS Foundation (Masiello et al. 2018). Relevance, reliability, as well as compatibility, is measured by the financial statements, and identifying the qualitative principles undoubtedly meets the objectives.
Task 2
Introduction
Ratio analysis is financial metric which is important to compare the financial performance of Unilever Plc. There are calculated four types of ratios which are profitability, liquidity, efficiency, and investment ratio to compare the financial performance of Unilever Plc.
Ratio analysis
Profitability ratio
Gross profit margin
2021(£)
2020(£)
Gross Profit
£ 22878
£ 22,040.0
Net Sale
£ 28,684.0
£ 29,102.0
Gross Profit Margin
0.80
0.76
Net profit margin
2021
2020
Net profit
£ 6026
£ 6,073.0
Revenue
£ 1240
£ 1300.0
Net profit margin
4.90
4.67
Table 3: Profitability ratio
Profitability ratio is the accounting ratio of Unilever Plc which is calculated after identifying gross profit and net sales of the business. Gross profit is almost £22878 in 2021 and £22040 in 2020. The gross profit ratio is almost 0.80 and 0.76% in both years of Unilever Plc (Assets.unilever.com, 2022). On the other hand, the net profit ratio is calculated after identifying the net profit and total revenue of the business which is almost 4.98 and 4.67% in both financial years.
Liquidity ratio
Current ratio
2021
2020
Current Asset
£ 16430
£ 16157
current liabilities
£ 67659
£ 64806
ratio (CA/CL)
0.24
0.25
Acid test ratio
2021
2020
Current Asset
£ 16430
£ 16157
Inventory
£ 4956
£ 4746
current liabilities
£ 67659
£ 64806
0.17
0.18
Table 4: Liquidity ratio
Liquidity ratio measures company’s ability or debt obligations and its margin of safety which is calculated by the liquidity ratio. The current ratio is 0.24 and 0.24% which is calculated by the current assets and current liability of Unilever Plc. The acid test ratio is 0.17 and 0.18% in both financial years.
Efficiency ratio
Inventory turnover ratio
2021
2020
Net Earnings
£ 6,795
£ 6,973
Shareholders' Equity
£ 15,475
£ 15,266
Return on Equity
43.91
45.68
Asset turnover ratio
2021
2020
Net sale
£ 28,684.0
£ 29,102.0
Average total asset
£ 67,597
£ 67,659
0.42
0.43
Table 5: Efficiency ratio
Efficiency ratio indicates the percentage of total expenses and total revenue in a financial year. The efficiency ratio of Unilever Plc is calculated by the inventory turnover and asset turnover ratio which is almost 0.42 and 0.43%.
Investment ratio
Price earning
2021
2020
Gross Profit
£ 22878
£ 22,040.0
Net Sale
£ 28,684.0
£ 29,102.0
Ratio
0.80
0.76
Earnings per share
2021
2020
Gross Profit
£ 22878
£ 22,040.0
Outstanding shares
£ 22,578.0
£ 23,645.0
Gross Profit Margin
1.01
0.93
Table 6: Investment ratio
Investment ratio is essential and identifies the relationship between the amount of money and profit which is made by the company. The company's total profitability and revenue are compared by the ratio analysis methods which is necessary to identify the financial health of Unilever Plc.
Conclusion and recommendation
Based on the above discussion it can be concluded that the profitability ratio represents the financial viability of Unilever Plc in various terms. Ratio analysis describes companies' efficiency level which is necessary to discover the financial health of the business. Total profitability which is generated by the company is compared by the ratio analysis methods. Financial ratios are compared to the line terms data of the business after considering the financial statements of Unilever Plc.
Reference list
Albanese, C., Crépey, S., Hoskinson, R. and Saadeddine, B., 2021. XVA analysis from the balance sheet. Quantitative Finance, 21(1), pp.99-123.
Alexander, D., Fiondella, C., Maffei, M. and Spanò, R., 2019. Reporting comprehensive income: The incoherencies of the IASB system and the possible contribution of Economia Aziendale. Accounting in Europe, 16(3), pp.340-359.
Huo, T., Ren, H., Zhang, X., Cai, W., Feng, W., Zhou, N. and Wang, X., 2018. China's energy consumption in the building sector: A Statistical Yearbook-Energy Balance Sheet based splitting method. Journal of cleaner production, 185, pp.665-679.
Kabir, H. and Rahman, A., 2018. How Does the IASB Use the Conceptual Framework in Developing IFRSs? An Examination of the Development of IFRS 16 Leases. Journal of Financial Reporting, 3(1), pp.93-116.
Masiello, B., Moscariello, N. and Fera, P., 2018. Political marketing strategies to foster the sustainability of private transnational organisations: the case of the IASB. Sustainability, 10(8), p.2652.
Mostafa, K.G., Montemagno, C. and Qureshi, A.J., 2018. Strength to cost ratio analysis of FDM Nylon 12 3D Printed Parts. Procedia Manufacturing, 26, pp.753-762.
Roška, V., Kuva?i?, D. and Merkaš, Z., 2019. ANALYSIS OF PROFIT AND LOSS STATEMENT OF THE LISTED COMPANIES IN CROATIA. EMAN 2019–Economics & Management: How to Cope With Disrupted Times, p.63.
Subalakshmi, S., Grahalakshmi, S. and Manikandan, M., 2018. Financial Ratio Analysis of SBI [2009-2016]. ICTACT Journal on Management Studies, 4(01), pp.2395-1664.
Van Mourik, C. and Katsuo Asami, Y., 2018. Articulation, profit or loss and OCI in the IASB conceptual framework: Different shades of clean (or dirty) surplus. Accounting in Europe, 15(2), pp.167-192.
Zavadskas, E.K., Stevi?, Ž., Tanackov, I. and Prentkovskis, O., 2018. A novel multicriteria approach–rough step-wise weight assessment ratio analysis method (R-SWARA) and its application in logistics. Studies in Informatics and Control, 27(1), pp.97-106.16
