Nobody downloaded yet

Business accounting - Essay Example

Comments (0) Cite this document
The performance of a business organization is quantitatively reflected in its financial statements. Ascertaining the financial health of a company has become important to different decision makers like managers, stockholders, potential investors and creditors…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.4% of users find it useful
Business accounting
Read TextPreview

Extract of sample "Business accounting"

Download file to see previous pages Financial ratio analysis enables decision makers to uncover trends in business performance and compare different business organizations (Keown, et. al 2005). It should be noted that these ratios are classified according to the aspects that they measure including profitability, liquidity, efficiency, solvency, and investor ratios. Considering that the business organization under consideration is considered small and medium business organization, this report will focus only on profitability, liquidity, and efficiency.
In terms of liquidity, the current ratio and the acid-test ratio will be utilized. At first look, the Northern Branch displays a slightly higher level of liquidity with its current ratio of 1.060. Should all of its current liabilities become due immediately, The Southern Branch will only be able to pay off 99.6% with its current assets. However, the acid test ratio shows that most of the Northern Branch's most current assets are tied up in inventories. In fact, when inventory is deducted from the current assets, it will only yield an acid-test ratio of 0.34. On the other hand, the Southern Branch has much more liquid assets indicated by its acid test ratio of 0.54.
In terms of efficiency, the following ratios will be considered: debtor's turnover; debtor days; creditor's turnover; creditor days; and stock turnovers which will be divided according to the main inventories namely, food and beverages. The Northern Branch has a lower debtor's turnover leading to higher debtor days which indicates the collection period of account receivables. During the fiscal year, the branch reports debtor's turnover of 9.30 and debtor days of 39.21. On the other hand, the Southern Branch appears to be more efficient in collecting its receivables with its debtor's turnover of 12.13 and debtor days of 30.08 days.
It is also apparent that the Southern Branch is relatively better in servicing its short term creditors as indicated by its higher creditor turnover and lower creditor days. The branch's creditor's turnover reported is 6.09, far better than Northern Branch's 1.74. This is translated to creditor days of 59.85 (Southern Branch) which is very much faster than Northern Branch's payment period of 208.63 days.
In terms of inventory management, the Northern Branch still lags behind the Southern Branch both in food and beverages. The Southern Branch's stock of food turns at an average of 17.24 annually and stays in the company's warehouse in a period of 21.17 days. On the other hand, the Northern Branch's turnover averages 5.66 times a year while stock days is 64.39. The same is true with beverages. While the Southern Branch has a turnover of 3.05 and stock days of 119.54, the Northern Branch is not able to sell its beverage stocks for the fiscal year. It stays in the company's warehouse for more than a year (593.39 days) before it is finally sold.
To measure profitability, this report will look at the return of capital employed (ROCE), gross profits, and net profit. The Southern Branch reports higher ratios in all these categories. The branch has an ROCE 0.36 compared to the Northern Branch's 0.26. In terms of profit margins, the Southern Bra ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Business accounting Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved de
(Business Accounting Essay Example | Topics and Well Written Essays - 1000 Words)
“Business Accounting Essay Example | Topics and Well Written Essays - 1000 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Business accounting

Business accounting

... Business Accounting Introduction The economic environment worldwide is ever changing taking into mind the recessions the world has experienced particularly the latest downturn of 2008/2009. Considering Europe in which one of the strongest economies, UK reside, is going through bad times including the case of Euro zone debt crisis which has affected the whole EU as well as the countries relating to it in any means. Europe, which was once considered one of the most successful world segment and was analyzed to take over US as the super power has now been dipped into the midst of debts and turmoil, especially the most indebted cities including Greece, Italy and Spain. Many other hurdles have struck Europe...
8 Pages(1500 words)Essay

Business Accounting

...? New product ideas and innovation have helped the British economy since its foundation. Innovation positively affects the economy because it provides companies with new products that increase revenues. The product idea that I have is a high degree oven that can be attached to existing street vendor equipment or can be sold as a complete vending unit to start your own pizza business. Pizza is a popular meal among British families. The pizzeria marketplace is a multi-billion dollar industry. The market for pizza meals includes the entire population of the United Kingdom of 62.7 million with the exception of babies who do not eat solid foods yet (Culturegrams, 2012). The pizza oven that I invented replaces the utility of a...
4 Pages(1000 words)Assignment

Business accounting

...?Introduction This paper is based on our efforts to document the value of accounting as a system and of the accountants who work on it to business enterprises. The goal of writing this paper includes the identification of concrete uses and application of data that have been generated through both financial and managerial accounting. The specific tasks and duties of an accountant are detailed herein, based on answers provided by a real-life accountant who has been requested to be a part of this research endeavor. An account of the owners of the business enterprise - as the employer of the...
6 Pages(1500 words)Essay

Business Accounting

... 2013] (2012). Annual Report Acer Group 2012. [Access 25 December 2013] (2013). Overview. [Access 25 December 2013] Dun & Bradstreet (2013). Key Business Ratios – SIC 3571: electronic computers. [Access 25 December 2013] Garrison, R., Noreen, E. (2003). Managerial Accounting (6th ed.). Boston: McGraw-Hill Irwin. (2013). Return on Assets (ROA). [Access 25 December 2013] (2013). Debt ratio. [Access... Group was 0.89 which is lower than the industry average of 1.50. The working capital of a business is calculated subtracting current liabilities from current assets. Acer Group had a working capital in 2012 of $954,888,000. This metric measures the ability of...
4 Pages(1000 words)Essay

Business Accounting

...Business Accounting a) Calculation are based on low level of risk assumed by the company and this level the risk adjusted discount rate (RADR) is given at 10%. Comparing the net present value of investment the alternative (ii) is preferred because present value of the investment in alternative (ii) is lower than the alternative (i). b) Assessment using Payback method Investment on new equipment $128,000 Year Cash flow Cumulative cash flow $ $ 1 40,000 40,000 2 80,000 120,000 3 30,000 150,000 4 12,000 162,000 The payback period of investment using payback method is three years. It is not possible to take risk based decisions under this method, because risk is function of time as well as...
4 Pages(1000 words)Essay

Business accounting

.... Moreover, the liquidity crunch problem makes the performance of Whole Foods Market, Inc. slightly vulnerable. SOLVENCY RATIO Debt to Equity: Dependency on debt financing is not a bad habit but it has consequences if you rely on more. Whole Foods Market, Inc. debt to equity ratio is lower in comparison with the previous year. The factors of business volume, Inc.rement in sales, fulfilment to pay the suppliers and acquisitions of fixed asset. Due to the expansion in business, Whole Foods Market, Inc. has plenty of financial obligations, most of which has been acquired through debt. In 2008, Whole Foods Market, Inc. reliance more on debt financing as compare to the previous years. Interest Coverage Ratio...
2 Pages(500 words)Assignment

Business accounting

...(Framework 24). Understandability A crucial feature of the information furnished in financial statements is that it has to be promptly apprehensible by users. For this reason it is assumed that users have a rational knowledge of business and economic actions and accounting and a temperament to analyse the information with sensible thoroughness. But certain information with regard to complex matters, just because they are difficult to understand by users cannot be excluded. Such information is important from the view of its significance to the economic decision-making needs of users (Framework 25). Relevance If the information depicted by the financial statements is to be relevant for its users then such...
6 Pages(1500 words)Essay

Business accounting

...quality organic poultry feed at a reasonable price.. The first step of this transformation is the writing of a business plan. This plan is being used as an internal document to assist in the development of the business. The Industry Poultry feed industry is not a new one in the market; it has developed with the poultry management practices. The industry has an elastic growth with the growth in demand for poultry. However, the traditional poultry feed industry, which is in China and Africa, comprises mostly of either local farmers who sell their by-products of grains to poultry farmers of fishermen who sell the dead fish. No research and development has been made on a large scale in this industry in...
7 Pages(1750 words)Essay


...According to Alberta’s Climate Change Program Strategy, the greenhouse gas can be accounted for. The government of Alberta has designed come up with a climate change strategy. There is a specified gas emitter’s regulation. The regulation considers the threshold or target or price, the ways of complying with the regulations and the context within which the greenhouse gasses are emitted (Bennett, Jan, & Teun, pp 122-2234). The Alberta has an offset system with an overview and the offset protocols, which applies the carbon capture and storage protocol. An accounting system has been established for verification and auditing of the entire system to ensure adherence to the regulations and the set standards. ...
2 Pages(500 words)Essay


...Business Accounting and International Standards Introduction Accounting standards are very important in that they make it possible for standard financial reports to be produced. This makes it possible for the profession of accounting to be standardized and therefore information sharing among parties and different stakeholders becomes easy. This need for a standardized accounting procedure has led to many standardization bodies to be founded in order to help in achieving standardization (Delaney, 2010). All countries in the world have their standardization body. However, according to Edrey (2011), as time has gone by, the requirement for a central global...
7 Pages(1750 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Business accounting for FREE!

Contact Us