Unit 2: Resources (P5, P7, M3, D2, D1)

6638 WordsOct 31, 201327 Pages
Unit 2: Business Resources P5 Is The Business Profitable? The closing capitals for both years are very similar and propose that not only is the business very profitable but it is also maintaining its financial position within the market. In 2011 the closing capital was £2,500,000 and for 2012 the closing capital was £2,425,000. This is interesting because as a business progresses you would think that the closing capital would increase not decrease although this is not too large a decrease when compared with the general current financial instability and the number of businesses which are struggling to stay afloat. The gross profit would also suggest that both years were profitable but with a decrease from £1,000,000 for 2011 to £740,000 for…show more content…
I think that Net profit is more important than Gross profit because although the business could have £740,000 (2012) in Gross Profit, the business may have very high expenses therefore the net profit figures offer a more realistic figure of the finances available. The Net profit shows the actual profit once all expenses are deducted from the Gross profit. The expenses could be higher than the Gross profits which once deducted would leave the business at a loss when they thought they were making a profit from the Gross Profit. In 2012 the expenses were £733,000. Once this was taken off the Gross Profit it left a Net profit of £7,000. If the expenses were even higher than the Net profit figure this would have been a negative balance causing problems for the business. What Is The Difference Between Current And Fixed Assets? The difference between Current and Fixed assets is that fixed assets are things the business intend to keep, they will not be selling them in order to turn them into money. Fixed assets are non-moveable in the business and lose value over time. Current assets are things the business owns and intend on selling (e.g. stock) or turning into cash for the business (or already have e.g. in the bank). Current assets are designed to be cash eventually and are much more liquid than fixed assets. What Is The Difference Between Current And Long-Term Liabilities? The difference between current and long-term liabilities is that current liabilities are
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