Q4Managerial Economics & Financial Accounting

The balance sheet provides a snapshot of a company's financial health on a specific date (usually the last day of the financial year). It provides three main blocks of information based on $Assets=Liabilities+Equity$.

Information Given: - Assets (What the company owns): Divided into Non-Current (long-term like Property, Plant, Equipment, Goodwill, Patents) and Current Assets (cash, inventory, accounts receivable intended to be converted to cash within a year). - Liabilities (What the company owes): Divided into Non-Current (long-term bank loans, debentures) and Current Liabilities (short-term debts like accounts payable, short-term provisions, taxes due). - Shareholders' Equity: The owners' residual claim. Includes Share Capital (money invested by shareholders) and Reserves & Surplus (retained earnings saved from past profits).

The P&L account shows the financial performance of the company over a period of time (e.g., April 1 to March 31). It matches revenues earned against expenses incurred.

Information Given: - Revenues: Revenue from Operations (core business sales) and Other Income (interest received, dividends, rent). - Expenses: Cost of Goods Sold (raw materials), Employee Benefit Expenses (salaries, wages), Finance Costs (interest paid on loans), Depreciation and Amortization, and Other Operating Expenses (rent, marketing, admin). - Bottom Line: Subtracting total expenses from total revenues yields the Profit Before Tax (PBT). Subtracting taxes yields the Net Profit or Loss (Profit After Tax), which is then transferred to the Balance Sheet under Reserves.