Compared With Other Business Structure Essay

Question:

Discuss About The Compared With Other Business Structure?

Answer:

Introducation

Income statement: This is basic statement helps n measuring the performance of the business. The income statement shows growth or downfall in revenue and profit of the business. Generally, net income is used as a parameter to measure the success of the business. It also shows the income earned by a business in a particular period of time (De Franco, Kothari & Verdi, 2011). The statement also shows the expenses incurred by the business in that particular period to run the business.

Balance sheet: The balance sheet is otherwise called the Statement of Financial Position as it shows data about the benefits, liabilities, and proprietors' value of the association. While the income statement is produced for a specific period, the monetary record is set up as on a specific date (Jim?nez, et al., 2010). Thus, the balance sheet reflects a financial review of the firm at a specific point in time. The component in balance sheets like assets, liabilities, equity and much more reveal the resources of the company owes in present. Also, reflects how these resources are financed by the company.

Cash flow statement: The Statement of Cash Flows gives data about the money inflows and outflows of a company amid a period. Cash flows are useful in deciding cash accessible pay loan to creditors of the company (Maravas & Pantouvakis, 2012). Normally an increase in income flow from operating activity shows a healthy income generation for the organization.

Accounting information help in management accounting

Management: In assessing how the administration has released its duty regarding securing and dealing with the organization's assets. Secondly on changing decisions about when to get or contribute in organization assets. It also helps in decisions regarding extension or downsizing in organization’s size.

Partners: Partners are more worried about the profits they earn from their capital in the organization and this aim is satisfied through using accounting information (Macintosh & Quattrone, 2010). Not exclusively do they need their capital in the safe zone but also keen in knowing the benefit earned or loss brought about by the business from time to time.

Employees– Employees are curious to know the accounting information elements of their company with the goal that they know about the general productivity of the organization which directly affects their compensation and employee stability.

Accounting information help in financial accounting:

Investors: External users are interested in knowing the ROI of the organization. As investors are not having direct access to business operations of the firm, accounting information helps them in locating out the money spent by the firm in a different area by managers (Weil, Schipper & Francis, 2013). It aids them in taking the decision regarding investment amount they are willing to spend.

Bank: They play an important part in the business organization because they advance a different kind of loans to business. Accounting information aids them in knowing the credit worthiness of a firm. Credit is allowed to organization and firm according to the financial soundness of firm, according to which terms and conditions of the loan are decided.

Regulatory authority: It includes government agencies and regulatory authorities which determine that accounts of the firm are prepared according to applicable principles, standards, and rules (Weygandt, et al., 2010). The objective behind these determinations is to save and protect the stakeholders’ interest of the firm. Tax evaluation is also done with help of accounting information after analyzing the financials of the organization.

Customers: They are the complex group which incorporating producers at all level of processing, wholesalers and retailers and the end customers. Sound financial well-being demonstrates that clients at each level are alright with the constant inflow of stock from the business. Customers utilize the bookkeeping data for surveying the financial position of its firms which is necessary for keeping up stable supply in future.

Dividend distributing is beneficial

Profit sharing has turned out to be one of another type of motivating forces called total incentive framework. These incentives forces interface the greater part of the workers of an organization in pursuing hierarchical objectives (Artz, 2010). A typical confusion of profit sharing is that it is more suited for smaller organizations where workers would more be able to effectively observe the association between their proficiency and company commitments. In fact, profit sharing is as a rule effectively used in big and small organizations, labor intensive and capital-intensive ventures, large scale manufacturing and employment circumstances, and businesses with unpredictable profits including with stable benefits. Profit sharing can remunerate representative performance, status, and thrift, depending upon the design of the future goals.

Profit sharing motivates many stakeholders of the organization to invest in the company more (Poole & Jenkins, 2013). These tendencies show that company does not want to absorb profits fully rather they are distributing it to shareholder in form of dividends.

Implications for not distributing Dividend

Employees: A major implication is on an employee for not distributing the dividend, as their investment in the company is not paying them returns. In case of smaller firms, major fluctuations in dividend distribution by companies affect the saving and income of employees (Wang, 2012).

Government interventions: If a company is not distributing dividend year to year it will have many implications by the government and regulatory authority. It will not be having any tax benefit which is applicable only when firms distribute profit. Government subsidies are also not granted many times if there are no profit sharing plans of the company.

Investors and creditors: Investors and debtors also will be least interested in granting fund to the firm, as there is no dividend distribution policy of the company. This indicates that whatever the company is earning it is retaining it for future or partners are sharing in themselves leaving no profits for other stakeholders.

Moreover, any investor will be least interested in investing money in business because it is interpreted generally that if the firm is not distributing profit, then it surely will not be providing the good return to investors.

References

Artz, B., 2010. Fringe benefits and job satisfaction. International journal of manpower, 31(6), pp.626-644.

Poole, M. and Jenkins, G., 2013. The impact of economic democracy: Profit-sharing and employee-shareholding schemes. Routledge..

Miles, D., Yang, J. and Marcheggiano, G., 2013. Optimal bank capital. The Economic Journal, 123(567), pp.1-37.

Da, Z., Guo, R.J. and Jagannathan, R., 2012. CAPM for estimating the cost of equity capital: Interpreting the empirical evidence. Journal of Financial Economics, 103(1), pp.204-220.

Altunba?, Y., Kara, A. and Marqu?s-Ib??ez, D., 2010. Large debt financing: syndicated loans versus corporate bonds. The European Journal of Finance, 16(5), pp.437-458.

Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.

Macintosh, N.B. and Quattrone, P., 2010. Management accounting and control systems: An organizational and sociological approach. John Wiley & Sons.

Weygandt, J.J., Kimmel, P.D., KIESO, D. and Elias, R.Z., 2010. Accounting principles. Issues in Accounting Education, 25(1), pp.179-180.

Wang, G., Wilson, C., Zhao, X., Zhu, Y., Mohanlal, M., Zheng, H. and Zhao, B.Y., 2012, April. Serf and turf: crowdturfing for fun and profit. In Proceedings of the 21st international conference on World Wide Web (pp. 679-688). ACM.

Jim?nez, G., Ongena, S., Peydr?, J.L. and Saurina Salas, J., 2010. Credit supply: Identifying balance-sheet channels with loan applications and granted loans.

Maravas, A. and Pantouvakis, J.P., 2012. Project cash flow analysis in the presence of uncertainty in activity duration and cost. International Journal of Project Management, 30(3), pp.374-384.

De Franco, G., Kothari, S.P. and Verdi, R.S., 2011. The benefits of financial statement comparability. Journal of Accounting Research, 49(4), pp.895-931.

M?ller, R.M. and Thoring, K., 2012. Design thinking vs. lean startup: A comparison of two user-driven innovation strategies. Leading Through Design, 151.

Firth, M., Mo, P.L. and Wong, R.M., 2012. Auditors’ organizational form, legal liability, and reporting conservatism: Evidence from China. Contemporary Accounting Research, 29(1), pp.57-93.

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