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Financial statements

Financial statements are statements that are prepare to fulfill a legal requirement. While it is important that companies prepare these documents, they also help the company and the government to assess the revenues for taxation purposes and then submitted to the Island Revenue within a stipulated time. Companies are also required share these documents to the ordinary shareholders who are the owners of the company to evaluate its financial strength while preference shareholders although not the owners may require dividends. Internally, the company's workers' may want to evaluate their security in the job, be able to pay NSES while the managers of the company may use them as a planning tool which will definitely show them where they have come from and where they are headed to in the near future, the next five years.

Income statements are financial statements that show how a company's revenue is transformed into net income over a period of time. The balance sheet is an important financial tool for investors as it summarizes the company's assets, liabilities and shareholder's equity at a certain specific time.  For investors, the balance sheet shows a summary of how much cash the company has on hand, how much the company owes and when the said payments are due as well as identifying valuable assets of the company. For new investors, they can apply ratios to evaluate how a balance sheet is healthy by applying liquidity and leverage ratios.

Sources of finance

Sources of long-term finance are those finances that are needed over a long-term period generally over a year.  Some of the long-term sources of finance are to buy long-term assets that will translate to long-terms. These could be fixed assets that are issued annually like the issue of shared capital which is part of the ownership of the company. The other long-term source is that of interest which bear long-term borrowing. This source is usually used to buy fixed assets, planes or buildings. When a company decides to take a long-term loan, it means that they are not obliged to pay shareholders a division of the profits if they are low. It gives them time to plan regularly as the company is liquid although they are meant to pay short-term interest.

The sources of short-term finance can be from cash and cash equivalents which is the company's money in the bank to finance its short-term obligations. It aids in the smooth running of business operations by being able to meet its day-to-day running activities. This is used in the everyday running of the company like the issues of wages, heating fuel. Other source of short-term finance can be other current interest like that of bearing deposits.   

Ratios

Financial report analyzes reports that will highlight the BA accounting ratios showing asset utilization liquidity and fixed charges coverage. The ratios include liquidity ratios, asset turnover ratios, financial leverage ratios and profitability ratios.

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