Marketing Mix of H&m Hong Kong

Income statement and balance sheet analysis

Ka Chun Mak

University of the People

Before preparing the balance sheet of diamond cleaning and maintenance service, we should calculate the numbers in the income statement first.

Gross profit is equal to the contract revenues minus contract costs. Contract costs is calculated by (5,146,862-614,343), which is equal to 4,532,519. Contract costs like cost of goods sales, it is the variable cost of the company not included the fixed cost such as general and administrative expenses. It can be used to calculate the contribution margin and break-even analysis for the business.

Net Income is income before provision for income tax minus provision for income tax, it is the income after taxes. Hence provision for income taxes is 266,217-150,767 = 115,450. Diamond gem paid 115,450 taxes to do business and had 150,767 net income that contributes to the shareholders.

Retained Earnings is the portion of profit that has not been distributed to shareholders. So the retained earnings, ending balance is equal to net income plus retained earnings at beginning balance. To calculate the retained earnings, beginning balance: (310,634-150,767) = 159,867

After finding out all the figures in the income statement, we can calculate and prepare the balance sheet. Total current assets represent the value of all assets that expected to converted into cash within one year. It is equal to cash plus contracts receivables and other assets. Contracts receivable can be calculated by total current assets minus cash minus other assets, which is (893,868-162,847-225,971) = 505,050. The company has legal right to receive 505,050 that they supplied their services to the customers.

Before providing cleaning and maintenance services, diamond gem needs to but equipment for running their business. It belongs to the property of the company and regarded as long-term assets. Total assets are the sum of long term and short term assets. The equipment value is equal to total assets minus total current assets: 1,180,660-893,868=286,792.

Total current liabilities is the sum of all current liabilities that the company has obligation to pay off the short-term to its creditors including accounts payable, line of credit, accrued expenses, income tax payable, current portion of notes payable, deferred income taxes. Hence accounts payable is (571,697-85,000-72,495-46,660-31,747-78,460)=257,335