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Management Accounting And Business Decision Making

2081 words - 8 pages

MANAGEMENT ACCOUNTING AND BUSINESS DECISION MAKING - ASSIGNMENT 2NAME: AlexGROUP NUMBER: BLEVEL: IntermediateHAND IN DATE: 13/01/2006Task 1Objectives: 1. To be able to demonstrate the ability to critically analyse given data using ratio analysis techniques.Profitability1. Return on ordinary shareholders' funds= ROSFROSF= Net profit after taxation and preference dividendOrdinary share capital plus reserves2004= 1,123* 100 = 3.91%28,7242005= 1,655 * 100 = 5.59%29,6322. Return on capital employed= ROCEROCE= Net profit before interest and taxation *100Share capital+ Reserves + Long-term loans2004= 1,701 *100 =5.92%28,7242005= 2,534 *100 = 8.55%29,6323. Net profit margin= Net profit before interest and taxation *100Sales2004= 1,701 *100 =14.58%11,6592005= 2,534 *100 = 12.37%20,4794. Gross profit margin= Gross profit *100Sales2004= 2,426 *100 = 20.81%11,6592005= 3,192 *100 =15.59%20,479EfficiencyAverage stock (inventory) turnover period= Stock held * 365Cost of sales2004= 2,904 *365 days = 114.8 days9,2332005= 4,406 *365 days = 93 days17,287Average settlement period for debtors= Trade debtors *365Credit sales revenue2004= 1,482 * 365 days = 46.4days11,6592005= 3,793 *365 days =67.6 days20,479Average settlement period for creditors= Trade creditors *365Credit purchases2004= 1,157 * 365 days = 45.7 days9,2332005= 1,976 * 365 days = 41.7 days17,287Sales revenue to capital employed ratio= SRCESRCE= Sales revenueShare capital+ reserves+ Non-current liabilities2004= 11,659 = 0.41 times28,7242005= 20,479 = 0.69 times29,632Liquidity1. Current Ratio= Current assetsCurrent liabilities2004= 5,247 = 0.76:16,8702005= 8,203 = 0.64:112,7302. Acid test ratio= Current assets (excluding stock)Current liabilities2004= 5,247 - 2,903 = 0.34:16,8702005= 8,203 - 4,406 =0.3:112,7303. Cash generated from operations to maturing obligations= CGOMOCGOMO= Cash generated from operationsCurrent liabilities2004= 4,852 = 0.7 times6,8702005= 1,376 = 0.1 times12,730Gearing1. Gearing ratio= Long term( non -current )liabilities *100Share capital + reserves + long term (non-current) liabilities2004= 0 * 100 = 0%29,632 + 02005= 0 *100 = 0%28,724 + 02. Interest cover ratio= Profit before interest and taxationInterest payable2004= 1,701 =17.54 times972005= 2,534 = 17.85 times142Investment ratios1. Dividend payout ratio= Dividends announced for the year *100Earnings for the year available for dividends2004= 668 *100 =59.48%1,1232005= 779 *100 = 47.07%1,6552. Price/earnings (P/E) ratio= Market value per shareEarnings per share2004= 93.75 = 20.42 times4.592005= 198 = 29.29 times6.76Objectives: 2To be able to write a good report from the perspectives set out in the case study and to make positive recommendations in both instances.Introduction:Ratio analysis is an excellent method for determining the overall financial condition of your small business. It puts the information from a financial statement into perspective, helping to spot financial patterns that may threaten the health of your...


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