The paper "Financial and Legal Role of Financial Planning Activities in Business " is an outstanding example of a finance and accounting assignment. Financial reporting is part of the financial planning activities, which entails the presentation of documents and records that show the financial position of an organization to the government, stakeholders, and management. These documents are collectively referred to as the financial reports of the organization, and they include income statements, statements of shareholders’ equity, balance sheets, and cash flow statements (Greenwood, 2002). Most of the businesses carry out financial reporting annually while others conduct it after every six months.
The financial reporting enables the stakeholders to assess the financial status of the organization and subsequently make important decisions such as how to enhance the financial performance of the organization. Apart from financial purposes, financial reporting is also required for legal purposes. In most of the countries across the globe, financial reports of companies and public organizations are required for financing, investment, and tax purposes (Greenwood, 2002). There are four different kinds of financial reporting and statements that companies typically do, and these include income statements, statements of shareholders’ equity, balance sheets, and cash flow statements. P2: Meaning and function of cost, profits, and revenues in the business Revenue is the amount of income that a company gets over a specific period of time.
Also known as sales revenue, turnover, sales, or total revenue, revenue is equivalent to the overall income of a company and measures all income received from the sale of goods and service. Cost is the total expenditure incurred by a business in developing a product or in the process of running various business operations.
Costs are categorized into two major categories: variable and fixed costs. Variable cost changes with the amount produced while fixed cost does not change regardless of the amount produced. Costs are also classified as direct and indirect costs. Indirect cost is that which cannot be linked directly to a product, and an example of such costs is rental expenses (Greenwood, 2002). On the other hand, direct costs can be linked to a product. Cost of raw materials is an example of direct costs.
Profit is the number of financial resources that are left after deducting all costs from the revenue. Mathematically, profit is calculated by subtracting the total costs from the total revenue as follows: profit = total revenue – total cost (Greenwood, 2002). All the above aspects, including the costs, profits, and revenues are very important in business are important in business as they help in determining the financial status of the business. P3: Break-even analysis and Break-even point Break-even analysis is an analysis level of sales at which a company would make zero profit. It used to determine the relationship between total costs, total profits, and total revenue of a company at different levels of output.
In other words, it is about determining profit at various projected sales levels, determining the breakeven point, and making key management decision regarding the relationship between the breakeven point and the probable sales (Greenwood, 2002). On the other hand, the break-even point is a point at which the total cost is equivalent to the sales volume at which the business has neither incurred a loss nor made a profit. In simple terms, it is a point at which there is no loss or profit.
Break-even point is calculated as follows:
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