1a ) The purpose of an income statement is to keep track of the profit and loss that a business occurs during a financial year. It can be used to show whether a company has the ability to make a profit and how it does so. Income statements are useful because they allow people within and out with the company to show how the company perform and help to identify whether they are sustainable in the future. It enables comparisons to be able to occur within the business itself year on year, but also can show whether the business is viable competition for its competitors. It can also mean that the business knows where its strengths and weaknesses are. If there is something that is causing a great loss to the company they can try to find ways around this to combat it and make their business stronger.
b)The income statement shows that the company are currently holding a large amount of stock at the end of the year. This could mean bigger losses for them the next year as the value that it is currently held at possibly may not be the money that it will make in the next year due to changes in fashion and sales, they may need to be sold at a discount to clear through this stock. There is also a concern ion the decrease in profit compared to expenditure. In 2013 profit was 9.7% of the expenditure whereas in 2014 this had decreased to being only 1.5% of expenditure.

2a) A balance sheet is a financial statement that shows the financial position at the end of a period. It is divided into three parts assets, liabilities and equity. It is a useful when looking into the financial strength of SportswearKit because it can allow the company to assess where it stand with both creditors and debtors. However it is important to remember that this report is only a statement on the businesses position at the time of the creation of the balance sheet the position can change quickly.
b) The concerns that I can see from the balance sheets are, Firstly, in 2014 SportswearKit has marginally less assets in 2014 than 2013 – before the bank loan – and considering the rise in equity, such as the computers and office equipment this could be seen as a negative for the company’s financial state. Secondly it is clear from the balance sheet that there was a large drop in profit for the company. These two points and the fact that they seem to have managed to enter an overdraft that is nearly as large as the loan they would like to take out all seem to have a negative outlook over the company comparing the two years. It is however positive that they have raised both their stock and also their debtors.

3a) A cash flow statement shows the flow of money into and out of the business through varying channels, such as interest, loans, borrowing etc. Cash is a vital part within businesses. It is a useful tool because it can help to balance the business spending and to make sure that the company stays afloat by making sure that there is at least as much money coming in as there is flowing out. If this were to happen the company would likely collapse and would be unable to function. It is also useful in comparison with other businesses as it can tell them where you are spending money that they aren’t and vice versa, to try and keep up with competition.
b) The company had a large increase in stock in stock in year 2014 due to their new investments this meant that there was a decrease in cash throughout the