Analyzing Business Types: Retail And Manufacturing

Retail Business

This paper tells about the different businesses such as service business, manufacturing business and retail business. In this report, the nature of retail and manufacturing business has been analyzed first of all. Further, both the businesses have been investigated on the basis of many factors such as final statements, process anddisclosure policies to investigate briefly over both the businesses. This report paper could beaccessedto examine the contradictory business types like manufacturing and retail business and few methods that both the businessesadopts to make the financial statements of businesses. This paper depict that retailbusiness is a business where products and services are retailed by the business to the customers through huge already existed distribution networkswhile manufacturing business is a business where products and services are manufactured by the business for the customers through huge already existed distribution networksor by using the direct selling techniques.

The method of recording the event and transaction into manufacturing businesses and retail business are prettydiverse in nature. Thetechniques of the arrangement of financial account, classifying the financial accounts and the widenrevelationof retail and manufacturing business types are fairly diverse. Unusual records of transaction, design of financial account, revelationof extend and procedure of financial accounthas been deliberatedwhile organizing this paperover the retail and manufacturing businesses to inspect the divergentsegments which are conscious by business types such as retail and manufacturing.

This informationis fairlyaccommodatingthe consumer to understand the dissimilartradecategories such as manufacturing business services business and retail businesses. Their methods of making the statements of final financial report. This report is fairlysignificant for the readers to recognize the dissimilarfeature of final financial statement with dissimilar business types. The keyimpartial of this report paper is to offer some comprehensive information about different businesses accounting to the user and reader.

This is the business where products and services are retailed by the business to customers through using many diversified networks. This business is used in every nation to retail the goods and productsto many consumersthrough huge diversified networks. Retail businesses involve intoretailing the finished products, goods and services to patrons in returnof money. This business connect themselves with the client through huge networks such as stores, mails, kiosks and internet.

These retail businesses make a daily report and each event and transactions are recorded by business on daily basis so that businesses could make a budget accordingly and strategies could be planned thoroughly.Mainly cash purchase, credit sales, credit purchase, and cash sales are considered by retail businesses while recording the figures. The figures are maintained by the retail business to offer an administrative work and financial planning for company (Bojadziev, 2007).

Retail businesses prepares the final accounts and statements through using the different accounting concepts, accounting equations and different formats than other business types. This difference occurs due to the fact that retail businesses maintain the records of events and transaction on daily basis. Retail businesses consider the daily journal entry to make the ledger accounts than with the help of ledger accounts, trial balance is prepared to check the balance and equivalent amount of both credit and debit side. After the trial balance income statement is prepared to analyze the total gross and net profit earned by the company in a year. Balance sheet and cash flow statement is also prepared to depict the final performance of company financially (Yang, Hongand and Modi, 2011). These statements help the company to analyze the whole financial performance of the company. Through the help of such statements company could make strategies and decision for future accordingly. The practice of these statements is comparatively unrelated in trade business from production business; the purposeful characteristics are disparate than other business types.

Financial Statement Format

In the retail business many aspects such as the liquidity position, net profit margin, borrowings, net profit, sales, assets, liabilities etc. are inspected to convene the dependability of company. For investigating the profitability and liquidity position of business, examination over operating cash flow is ended. With analysis of liquidity, some conditions are connected. This depict that liquidity position of retail business could be lower due to many factors such as less sales, low margin, current assets and current sales etc (Martaniand and Khairurizka, 2009).

For analyzing the profitability condition of the company, income statement is examined of the business. Profitability condition of a company could be affected through many changes such as internal or external changes. For example, depreciation method, government regulations, economical factors, supplier, tax rate etc.

Financial statement format is as follows:

(Koren, 2010)

Thorough analyzing over the retail business annual reports and many journal articles, it has been found that the retail businesses disclosure extent is quite wider. Retail businesses reveal all the important factors and changes in the company in annual report so that all the external users could know about it. Mostly, the retail business depict about increment in sales, new markets, diversification, expansion, merger, projects etc in annual report. Businesses also tell the annual report user about the new markets, investments, collaboration, activities, amortizations etc. to advance the worth of annual report.

This is the business where products and services are manufactured by the business for the ending users. In this business, services and products are transferred by company from raw material to a finished product. These finished goods are sent to the end users through using many diversified networks. This business is used in every nation to produce the goods and products for many consumers and send it to them through huge diversified networks. Manufacturing businesses engage into producing the finished products, goods and services to patrons in return of money (Sweeney and Coughlan, 2008). This business connects themselves with the client through huge networks such as stores, mails, kiosks and internet.

These manufacturing businesses make a periodic report and each event and transactions are recorded by business on periodic basis so that businesses could make a budget accordingly and strategies could be planned thoroughly. Mainly cash purchase, credit sales, costing methods, absorption costing are considered by manufacturing businesses while recording the figures. The figures are maintained by the manufacturing business to offer an administrative work and financial planning for company.

Manufacturing businesses prepares the final accounts and statements through using the different accounting concepts, accounting equations and different formats than other business types. This difference occurs due to the fact that manufacturing businesses maintain the records of events and transaction on periodic basis. Manufacturing businesses consider the ledger accounts than with the help of ledger accounts, trial balance is prepared to check the balance and equivalent amount of both credit and debit side. After the trial balance income statement is prepared to analyze the total gross and net profit earned by the company in a year. Balance sheet and cash flow statement is also prepared to depict the final performance of company financially (Kolkand and Perego, 2010). After it company make the journal entries. These statements help the company to analyze the whole financial performance of the company. Through the help of such statements company could make strategies and decision for future accordingly. The practice of these statements is comparatively unrelated in trade business from production business; the purposeful characteristics are disparate than other business types.

In the retail business many aspects such as costing techniques, traditional and ABC approach, inventory management, borrowings, net profit, production, assets, liabilities, depreciation, amalgamation etc. are inspected to convene the dependability of company. For investigating the profitability and liquidity position of business, examination over operating cash flow is ended. With analysis of liquidity, some conditions are connected. This depict that liquidity position of retail business could be lower due to many factors such as less sales, low margin, current assets and current sales etc (Martaniand and Khairurizka, 2009).

For analyzing the profitability condition of the company, income statement is examined of the business (Higgins, 2012). Profitability condition of a company could be affected through many changes such as internal or external changes. For example, depreciation method, government regulations, economical factors, supplier, tax rate etc.

There are many equations of financial statement in construction house to enhance the value of the momentous organization. Some final financial statement relationships are as below:

Cost of goods manufactured statements:

Material used = materials (beginning) + material purchases – materials inventory

(Ending)

Cost of goods manufactured = materials used + factory labor + manufacturing

Overhead + work in process (beginning) – work in process (ending)

Cost of goods sold = finished goods (beginning) + cost of goods manufactured

– finished goods (ending)

Beginning finished goods + cost of goods manufactured areoften known as total finished goods existing for sales.

Net income = sales – cost of goods sold – operating expenses

Change in cash = sources and uses from operations + sources and uses from

Financing activities + sources and uses from investing activities (Saundersand and Cornett, 2014).

Assets = liabilities + stockholders’ equity

Assets = current assets + fixed assets + other assets

Liabilities = current liabilities + long-term liabilitiesStockholders’ equity = common stock + premium/discount on common stock +

Retained earnings (Kirkos, Spathisand and Manolopoulos, 2007)

Table 1(Jouini, 2013) 

(Healyandand Palepu, 2012)

Thorough analyzing over the manufacturing business annual reports and many journal articles, it has been found that the manufacturing businesses disclosure extent is quite wider. Manufacturing businesses reveal all the important factors and changes in the company in annual report so that all the external users could know about it. Mostly, the retail business depict about increment in production, new markets, diversification, expansion, merger, projects etc in annual report. Businesses also tell the annual report user about the new markets, investments, collaboration, activities, amortizations etc. to advance the worth of annual report.

After doing a study over manufacturing and retailing business reports it has been investigated that the recognizing of transaction, the process of making the financial statements, degree of exposure and arrangement of final statements of retail and manufacturing business is fairly unrelated from each other (Geraedts, Doubrovski, Verlindenand and Stellingwerff, 2012). For example retail businesses make a daily report and each event and transactions are recorded by business on daily basis while manufacturing businesses make a periodic report and each event and transactions are recorded by business on periodic basis. The character of trade business and manufacturing houses is different for impacting over activities or events of the company.

This study depicts that retail and manufacturing business makes the final statements differently. Retail business considers the credit purchase, cash sales, cash purchase and credit sales whereas manufacturing business considers the costing absorption, cost of goods sold, costing method, depreciation, amortization etc (Behrouzi and Wong, 2011)  to organize the final statements of company (David, 2011).

The exposure in annual report of both business houses is fairly comparable. The only difference is retail houses divulge about new advertising and promotional methods and few new activities whereas manufacturing house divulge about costing method, depreciation method and absorption costing by manufacturing business. Both the business make final statements in different format which are based on accounting in retail business and on costing techniques in manufacturing business.

The manufacturing businesses and retail businesses concepts of accounts are quite comparable, the only distinction between manufacturing and retail businesses are that entries are finished in manufacturing house after preparing the final statements. Manufacturing account make 3 inventory accounts and retail business make 1 inventory account.

Conclusion:

Through the above report and analysis, it has been originated that retail and manufacturing houses are fairly different in character. Manufacturing account make 3 inventory accounts and retail business make 1 inventory account.  Retail businesses make a daily report and each event and transactions are recorded by business on daily basis while manufacturing businesses make a periodic report and each event and transactions are recorded by business on periodic basis.

This study depicts that retail and manufacturing business makes the final statements differently. Retail business considers the credit purchase, cash sales, cash purchase and credit sales whereas manufacturing business considers the costing absorption, cost of goods sold, costing method, depreciation, amortization etc.

References:

Behrouzi, F. and Wong, K.Y., 2011. Lean performance evaluation of manufacturing systems: A dynamic and innovative approach. Procedia Computer Science, 3, pp.388-395.

Bojadziev, G., 2007. Fuzzy logic for business, finance, and management (Vol. 23). World Scientific.

David, F.R., 2011. Strategic management: Concepts and cases. Peaeson/Prentice Hall.

Geraedts, J., Doubrovski, E., Verlinden, J. and Stellingwerff, M., 2012, May. Three views on additive manufacturing: business, research and education. In Ninth Int. Symp. Tools Methods Compet. Eng., I. Horváth, A. Albers, M. Behrendt, and Z. Rusák, Eds (pp. 1-15).

Healy, P.M. and Palepu, K.G., 2012. Business analysis valuation: Using financial statements. Cengage Learning.

Higgins, R.C., 2012. Analysis for financial management. McGraw-Hill/Irwin.

Jouini, F., 2013. Corporate governance and the level of financial disclosure by Tunisian firm. Journal of Business Studies Quarterly, 4(3), p.95.

Kirkos, E., Spathis, C. and Manolopoulos, Y., 2007. Data mining techniques for the detection of fraudulent financial statements. Expert systems with applications, 32(4), pp.995-1003.

Kolk, A. and Perego, P., 2010. Determinants of the adoption of sustainability assurance statements: An international investigation. Business Strategy and the Environment, 19(3), pp.182-198.

Koren, Y., 2010. The global manufacturing revolution: product-process-business integration and reconfigurable systems (Vol. 80). John Wiley & Sons.

Martani, D. and Khairurizka, R., 2009. The effect of financial ratios, firm size, and cash flow from operating activities in the interim report to the stock return. Chinese Business Review, 8(6), p.44.

Saunders, A. and Cornett, M.M., 2014. Financial institutions management. McGraw-Hill Education,.

Sweeney, L. and Coughlan, J., 2008. Do different industries report corporate social responsibility differently? An investigation through the lens of stakeholder theory. Journal of Marketing Communications, 14(2), pp.113-124.

Yang, M.G.M., Hong, P. and Modi, S.B., 2011. Impact of lean manufacturing and environmental management on business performance: An empirical study of manufacturing firms. International Journal of Production Economics, 129(2), pp.251-261.

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