Unit 1 IP - Business Environment and Recording Transactions - Introduction to Accounting

Resources Available from the Balance Sheet

The Balance Sheet is a financial report that provides useful information in a financial analysis . This statement namely helps the financial analyst to asset the liquidity and financial stability of the organization , by conducting vertical and horizontal analysis . These financial examinations will be conducted for L . L . Sams and Melinda Garcia Career Services below

Liquidity of Organizations Considered

Working Capital Current Assets - Current Liabilities

L . L . Sams 108 ,500 - 12 ,000 96 ,500

Melinda Garcia Career Services 19 ,000 - 6 ,000 13 ,000 p

The working capital of L . L . Sams is much higher than that of Melinda Garcia Career Services . This indicates that L . L . Sams holds more liquid assets than the other organization . This is a sound factor for the liquidity of the firm

Financial Stability of Organizations Selected The proportion of debt capital in relation to equity is very high for Melinda Garcia Career Services . This means that the organization has a higher amount of debt in relation to equity . Such factor does not apply to L . L . Sams , which holds a very low gearing . Therefore it is more difficult for Melinda Garcia Career Services to meet its debt commitments rather than the other company , leading to a weaker financial stability

Recommendation on Company to invest in

From the calculations computed above it is more viable to provide the loan to L . L . Sams rather than the other company . However , before rushing into any drastic conclusions it is important to...