Managing Financial Resources Decisions

Managing Financial Resources Decisions
Scenario
The bank loan was approved after youre recommendations were put in place. It is the end of the financial year and the accounts have been prepared. You have been asked to break down the results of the year. You have been asked to compare the current year with the previous year and outline clearly if the business has improved on its previous years results.
Grading Criteria
M2: Select, design and apply appropriate methods/techniques.
D1: Use critical reflection to evaluate your own work and justify valid conclusions.
Step 1 - Compare and contrast the financial statements used by a sole-trader business and a limited company. Why are they different? What extra information, guidelines and accounting standards does a limited company have to follow when preparing its financial accounts?
Step 2 - Calculate relevant accounting ratios that would help you discuss performance, liquidity and Efficiency.
Use the ratios calculated as a tool to compare the current financial year and the previous year.
Advise whether there have been improvements from one year to the next and make recommendations as to how the business can improve.
To achieve the M2, relevant ratios must be chosen that apply to the scenario. An ordinary definition of the ratio and its calculation will yield no marks. The ratio must be applied to the figures and discussed from the point of view of the scenario. You must also compare it with other relevant ratios to make it more meaningful.
To achieve the D1, your ratios must be specifically linked to your recommendations. Any generalisations will be ignored. You must focus on the information presented. You must also compare the business to the industry in general.