Efficiency Ratios The efficiency ratio is used to measure how the company uses its assets and liabilities internally, these ratios to measure the performance in short term. • Accounts Receivable Turnover This ratio used to measure the firm's effectiveness in extending credit and in collecting debts. The receivables turnover ratio is an activity ratio measuring how successfully a In collecting its AR during the year, if the company has AR turnover 2 that means the AR turned over two times during the year. Accounts Receivable Turnover= Credit sales AR average (assume that 75% sales are credit) AVON= 9.1 ULTA= 41.1 REVLON= 4.12 • Fixed Asset Turnover, Reflecting how efficiently a company has used its assets to generate revenue, a higher ratio indicate of greater efficiency in managing and investing fixed-asset. Fixed Asset Turnover= Net sales/ net assets EVON= 1.63 ULTA= 1.9 REVLON= .77 • Inventory turnover Inventory turnover is a ratio showing how many times a company's inventory is replaced over a specific period of time, the higher ratio the more success is the company in selling its inventory.
The fundamental aim of financial managers is the optimal allocation of the scarce resources available to them – the scarce resource being money. Corporate finance theory therefore draws heavily on the subject of economics. In corporate there are two types of finance: Internal finance Sources of finance can be divided into external finance and internal finance. By internal finance we mean cash generated by a company which is not needed to meet operating costs, interest payments, tax liabilities, cash dividends or fixed asset replacement. This surplus cash is called retained earnings in corporate finance.
Financial Accounting is a field of accounting concerned with a company’s financial transactions. It uses standardized accounting guidelines to record, summarize and present the transactions to mainly external users periodically by means of Financial Statements. Creditors and other lenders like banks and other financial institutions, Government Authorities, Prospective Investors, Customers, Competitors and Regulatory Authorities are some of the External Users who may use these Accounting information for various decision making purposes. Managerial Accounting also referred to as Cost Accounting is a branch of accounting that helps in identifying, analyzing interpreting, preparing and communicating both Financial and Non-Financial information
What are the three basic financial statements, and what major information does each contain? Please explain in detail. A Financial Statement is a document for reporting business financial performance and resources. The basic three financial statements are: 1- Income statements: The Income Statement shows the revenue and expenses for specific year (period of time) to determine the company’s profit or loss by comparing the revenues with its expenses. The information listed on the income statement is mostly in relatively current dollars, and so represents a reasonable degree of accuracy.
In the case the management team decides to remain in the current method, then other solutions can be done without the need to lay off some employees. Other solutions can be recommended. III. Relevant Stakeholders a. Oscar Gamble, as Shields Corporation’s Controller: high net income means security and profitability of the company; low net income may mean lay off of some employees to reduce expenses, thus somehow increasing income; b. Accounting staff : high net income means security of employment, while low net income may mean lay off of employees including the accounting staff to reduce administration expenses; c. Owners of the company: high net income means
Exposure to credit risk is managed in part by obtaining collateral and corporate and personal guarantees. Counterparty limits are established by the use of a credit classification system, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision. Liquidity Risk Liquidity risk is the risk that the company is unable to meet its payment obligations associated with its financial liabilities when they hall due and to replace funds when they are withdrawn. GK’s liquidity management process, as carried out within the Group through the ALCOs and treasury departments includes: o Monitoring future cash flows and liquidity on a daily basis o Maintaining a portfolio of highly marketable and diverse assets that can easily be liquidated as protection against any unforeseen interruption to cash flow o Maintaining committed lines of credit Currency Risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Week 8 June 1 – Accounting Statements and Cash Flow The topic that I have learnt today is on accounting statements and cash flow. The statement of cash flows contains the operating, investing and financing which are primary in business activity. Inflow is when the money are received and not necessarily earned. Whereas, outflow is when the cash is paid and not necessarily incurred. The information you get from the cash flow statement can help evaluate the company’s ability to meet its obligations.
The breakeven point is where total costs(both fixed and variable) and total sales are equal, this shows that the company has not made a loss or profit.as Artill and Mclaney has stated, breakeven point analysis can provide useful insights concerning the relationship between cost, volume and profit.BancABC mainly uses this analysis when after opening a new branch to ascertain whether the branch is making profit or not looking at how much expenses has been incurred in opening the branch and the volume of customer transactions carried out at that particular branch including staff costs for the branch. (use more examples from the
Under time period assumption, we prepare financial statements quarterly, half-yearly or annually. Theincome statement provides us an insight into the performance of the company for a period of time. Thebalance sheet (also known as the statement of financial position) provides us a snapshot of the business ' financial position (assets, liabilities and equity) at the end of the time period. The statement of cash flows and the statement of changes in equityprovide detail of how the company 's financial position changed during the time period. One implication of the time period assumption is that we have to make estimates and judgments at the end of the time period to correctly decide which events need to be reported in the current time period and which ones in the
The main role of SEC is to ensure that the stock markets operate in such a direction that it will create fair atmosphere for all investors. Goldman Sachs is the global investment banking, securities and investment management firm. Past event- The reasons of great depression, financial crisis 2007 were liquidity shortfall in U.S. banking system and the