University of Greenwich ID Number: 001361405

FPT Student ID Number: GBD230070

Module Code: FINA1161

Module Assessment Title: Introduction to Finance for Business – Report 1

Lecturer Name: Nguyen Minh Nhat

Submission Date: 29/02/2024

 Table of Contents
Case Scenario & Tasks ........................................................................................................................ 3

1. A brief report ................................................................................................................................ 4

2. Assessment..................................................................................................................................... 4

References ............................................................................................................................................. 6
Case Scenario & Tasks
a) Write a brief report to present to the investor outlining the information he has requested.
b) How do you think Inbal Berardi’s business has performed in its first month of operations, and
explain your assessment using the numbers from the statements below?

Income statement Balance sheet

 1. A brief report
Detailed activities in relation to the financial statements.

- 1/4/2023: Inbal Berardi - the owner invested £35,000. (Initial capital in Balance sheet)
- 3/4/2023: Renting a store from Nick with the price of £5,000/month and £560 store insurance.
(Expenses in Income statement)
- 4/4/2023: Signing a Mobile phone contract rental with Anna that costs £100. (Expenses in
Income statement)
- 5/4/2023: Buying a printing machine from IKEA that is worth £750. (Non-current Asset in
Balance sheet)
- 6/4/2023: ApecCards purchased 1,000 blank cards from Peter with £1,000 (Cost of Sales).
However, he only paid £500 and created a short-term debt to the supplier (Trade Payables).
- 10/4/2023: Signing up for Sales entertaining and G&F Marketing Consultancy of KPMG with
£125 and £2,000 respectively. (Expenses in Income statement)
- 16/4/2023: ApecCards sold 800 cards for £6400 to Angela. Nevertheless, she only paid £6200
and thus owed £200 (Account receivable).
- 30/4/2023:
• Having sold 800 blank cards and made a Gross profit of £5,600.
• Paying the NextEra Energy’s electricity bill with £600. (Expenses)
• 200 blank cards remained in the store. (Closing inventory)
• Having a total of £31,565 in the bank. (Bank account)
• The amount of profit the business has left after subtracting all the expenses is negative
£2,785. (Retained earnings)

2. Assessment
Nowadays, financial statements are the most thorough and reliable source of data from which to infer
a company's assets, liabilities and financial standing of a business. (Osadchy et al., 2018). By looking
at the financial statements, it can be seen that the operation, financing and investment of Inbal Berardi’s
business are expressed precisely and promptly, which helps the organization understand the business’s
position and what they should do in the future (Hasanaj and Kuqi, 2019).

To be more specific, in the first month of operation, his business experienced a loss of £2,785 mostly
due to the over spending in the expenses. The business was able to make a gloss profit of £5,600 after
subtracting cost of sales. However, the choice of store rental price was relatively poor because this
category alone took £5,000. Consequently, with only £600 left, the owner failed to make a profit since
there were five other expenses while running the business. Nevertheless, the current assets that Inbal’s
business had remained fairly abundant at £32,215 despites the profit loss.

In the future, Inbal needs to recalculate the expenses in running the business, especially the prices in
renting a store, because even if he was able to sold 1000 cards, he would still make a loss profit of
£1,385. Furthermore, apart from expanding the business, keeping the earnings persistent should also
be taken under consideration. If there are barely economic shocks due to external factors such as the
pandemic, the persistence rate of earnings would be stable for most of the time (Frankel and Litov,
2009). Lastly, in regards to avoiding loss profit and decreasing earnings, the act of earnings
management can be a useful assistant in avoiding losses as profound evidence has been found;
meanwhile, earnings decrease is still hard to avoid in spite of earnings management (Scholar, 2005).
References

Frankel, R. and Litov, L. (2009) ‘Earnings persistence.’ Journal of accounting and economics, 47(1),
182-190.

Hasanaj, P. and Kuqi, B. (2019) ‘Analysis of financial statements.’ Humanities and Social Science
Research, 2(2), 17.

Osadchy, E. A., Akhmetshin, E. M., Amirova, E. F., Bochkareva, T. N., Gazizyanova, Y. Y. and
Yumashev, A.V. (2018) ‘Financial statements of a company as an information base for decision-
making in a transforming economy.’ European Research Studies Journal, 21(2), 339-350.

Scholer, F. (2005) ‘Earnings management to avoid earnings decreases and losses.’ Financial reporting
research group.