Question

Discuss how you might expect the financial statements reported by a Manufacturing company to differ from that reported by a financial firm. You should make sure to carefully consider differences in assets and liabilities.

Answer 1

Manufacturing companies work on converting raw materials to finished goods using machines/ tools/ labour

Whereas, financial firms accept money from the public and lend money and charge interest, or, invest money and distribute its returns.

The major differences can be highlighted as follows:

Basis of difference	Manufacturing entity	Financial firm
Stock of goods	Raw material, work in progress and finished goods	Not there, it belongs to service sector
Cash and cash equivalents	Normally lower	It is comparatively higher
Fixed assets	Such entites are capital intensive, value of assets is very huge like Plant & machinery, Land & building etc	It is comparatively higher
Investments	May or may not have investments	They mostly have investments
Trade receivables	Arising out of credit sales	It refers to loans receivable in short term
Loans and advances	It is normally a liability	It is normally an asset
Trade payables	Arising out of credit purchases	It refers to deposits repayable in short term