1) Final accounts= a set of accounts prepared at the end of the year, informing stakeholders about
the financial situation of the business and its profitability
2) debtor= someone that owes money
3) Economic externalities are affecting the pace of the firm's growth. This is because when there is a
recession, or an economic slowdown, the spending of consumers in the economy is lower,
therefore the revenues of the firm will automatically be lower as well, especially when the firm
produces luxury goods (because of the income elasticity of demand for goods that are not
regularly purchased), which Natcloth does. Another external factor is the environment, as
because the firm uses organic materials when there are a lot of events happening around the
worsening climate, people are more likely to purchase from the firm.
4)
Profit/loss statement of Natcloth Ltd 31/12/2021
Trading account:
Sales revenue 410
Direct costs (170)
Gross profit 240
Profit/loss account:
Overheads(indirect costs) (40)
Net profit 200
Interest (50)
Pre-tax profit 150
Tax (20%)
Profit for period 120
Appropriation of account:
Dividents 48
Retained profits 72
5)
Balance sheet of Nathcloth Ltd 31/12/2021
Current assets:
Inventory 60
Debtors 35
Cash 40 Total current assets: 135
Non-current assets (fixed):
Inventory 300
Machinery 200
buildings 300
Depreciation (80) Total fixed assets:720
Total Assets: 855
Current liabilities:
Creditors 50
Short term loans 8 Total current liabilities: 58
Non-current liabilities:
Long term loans 115
Total liabilities: 173
Net assets: 682
Shareholder's equity:
Share capital 492
Retained earnings 190
Total shareholder's equity:682
8) Business managers will set targets and budgets and can measure performance depending on how the firm is
doing, which can be read off of the final accounts. The government also needs access to the final accounts because
they show if the firm is paying the appropriate taxes- eliminating tax evasion.
9) Economies of scale will likely cause the prices to decrease. This is because the costs of the business will increase.
This is assumed because of the definition of economies of scale, which is the decreasing average costs of
production as an organization increases the scale of operations. Unless the firm concludes that decreasing the price
won't increase sales by a big enough amount, then there is no reason for it to not decrease the price, as it will most
likely increase revenues, and give the firm an advantage over competitors.
10) Since there are low-interest rates, a long-term loan can be relatively cheap and only cost the first a low amount
each year. On the other hand, if the interest rate is not fixed and it increases it might cause the yearly liabilities to
increase by a bigger amount, creating potential losses as the firm won't generate enough additional profit to cover the
interest.Since the firm only has low liabilities compared to its assets, it is comparably low risk to have to pay an extra
long-term liability every year. On the other hand, it might not attract investors that the business is taking a loan, as it
might indicate instability in liquidity and stability of the business. Some alternatives might include a short-term loan,
which doesn't have the risk
