Monday, March 23, 2015

Please Explain what is the shape of profit for example if a company has made a profit of 1000 usd then where is this 1000 usd in balance sheet.is it true that net working capital is financed by profi?

Please Explain what is the shape of profit for example if a company has made a profit of 1000 usd then where is this 1000 usd in balance sheet.is it true that net working capital is financed by profi?
the answer is partially correct. retained earinngs does finance net working captial.working capital is financed by both sources first with internal sources such as retained earning and with long term external sources such as equity, debt or bank borrowingProfit can be in a variety of places on the balance sheet. It may go into retained earnings on the Stockholder's equity side, it might be paid out in dividends, or go right into cash and accounts receivable on the asset side. A better way to find out the profit of a company is to take a look at their Profit-and-Loss statement (also called an income statement). Here you will find a very detailed picture of how a company generated revenue, spent revenue, and the end picture (profit or loss).

Working capital as very little to do with profit. Working capital is current assets minus current liabilities. It is a measure of the liquidity of a business. It would be more correct to say that working capital is funded by revenue, although a business simply doing business contributes to working capital.

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