Assignment:Fiscal determination doing for directorUnit of measurement Name Submitted By:
Course:Diploma in ManagementDegree 6 ATHE Number:7048Submitted Date:Table of Contentss1.

1RATIO Analysis:1.2 Detailss of ratio Analysis with Example for Contosa company WORKING CAPITAL MANAGEMENT:1.4 CASH FLOW Prediction:REFERANCES:

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

1.1RATIO Analysis:

Using set of publish history for existent concern organisation, carryout ratio analysis for two old ages.Ratio:

  • A ratio is a simple arithmetical look of the relationship of one figure to another.

  • It may be defined as the indicated quotient of two mathematical looks.

Precautions for usage of Ratios

  • Accuracy of Financial Statements
  • Purpose of Analysis
  • Choice of Ratios
  • Use of Standards
  • Caliber of the Analyst
  • Provides merely a Bases
  1. Liquidity Ratios:

Liquid means the ability of a concern to run into it current duties.Current Ratio=Current Assets/Current LiabilitiesStandard 2:1

  1. Stock Turnover Ratio:

Every house should hold sufficient degree of Inventory. It should neither be excessively high nor excessively low.This ratio indicates the figure of times the stock has been turned over during the period and evaluates the efficiency with which a house is able to pull off its stock list.

  • Stock Turnover Ratio=COGS/Average Stock

COGS =Cost of Goods Sold=Sales – Gross Net incomeOROpening Stock + Purchases +Direct Expenses-Closing StockAV. Stock =Opening Stock + Closing Stock2

  1. Debtors Or Receivables Turnover

=Net Credit Annual Gross salessAverage Debtors & A ; B/RAverage aggregation Period =365/52/12DTR

  • This indicates the figure of times the debitors are turned over during a twelvemonth.

By and large, higher the value of debtor’s turnover the more efficient is the direction of debitorsA really high this ratio may connote firm’s inability due to miss of resources to sell on recognition thereby losing gross revenues and net incomes.

1.2 Detailss of ratio Analysis with Example for Contosa company

Ratios 2010-2011 2011-2012
Liquidity Ratio
Current ratio 3.


Quick ratio 1.93 1.64
Employee turnover Ratio
Inventory bend Over ratio 1.17times 1.


Debtor turnover ratio 44days 36days
Creditor turnover ratio 20days 18days
Leverage Ratio
Debt equity ratio 0.75 5.90
Profitability Ratio
Net net income border 0.25 0.31
Tax return on Assetss 0.


ROCE 1.00 1.


Tax return on entire assets Turnover 0.26times 0.25times

Interpretation:The company has high current ratio so it has the ability to dispatch current liabilities by bring forthing hard currency from current assets. So it is good for the company.

The company enjoys high debt equity ratio it shows the aggressive entrepreneurial spirit of boosters. So the company has to increase the load. Because company is to pay high involvement.So that mean aggregation period is low.

So that it is good for the company. The net net income border is around o.31. So that company is attempt to increase the net net income.

The return on fixed assets is low. So that the money is blocked. The fiscal place is unsatisfactory.Trend Analysis of Balance Sheets as On that Date

Particulars 31/03/2011 31/03/2012
Capital & A ; Liabilitiess:
Beginnings Of Fundss:
Share capital 100 100
Militias & A ; surplus 100 101
Loans 100 7.82
Current liabilities 100 102.25
Entire Beginnings of Fundss 100 163.


Uses of Fundss
Fixed Assetss 100 100.52
Investing 100 102.64
Current Assetss
Inventories 100 97.


Advance & A ; Sundry Debtors 100 75.05
Cash & A ; Bank Balance 100 101.66
Entire Uses Of Fundss 100 163.79

Interpretation:The modesty & A ; surplus is increased so that most of the net income is distributed to reserve & amp ; excess. So that it is good for the company.

Net fixed assets is increased. The investing is besides increased. Inventories is decreased. So that it is good of the company. So that company in non confront the on the job capital, job.

The loans decreased 100 to 7.82 so that company is to pay less involvement. So that net income is increased.

The company has relied on long term debt for equity. So that it is good or the company.Trend Analysis of Profit & A ; Loss Account for Period

Particulars 31/03/2011 31/03/2012
Gross saless 100 92.07
Increase/Decrease of Stock 100 ( 91.54 )
Entire Income 100 92.90
Cog 100 93.


Processing disbursals 100 71.55
Packing disbursals 100 79.23
Power & A ; Fuel disbursals 100 79.22
Salary & A ; rewards 100 103.


Repair & A ; care 100 88.91
Raw stuff ingestion 100 91.62
Selling disbursals 100 81.26
Assorted disbursals 100 82.71
Entire Expenses 100 92.


Net net income transferred to capital A/c 100 113.55

Interpretation:The gross revenues are increased by 7.93 % . The company has controlled natural stuff cost significantly and has attained economic of graduated table. The salary & A ; rewards disbursals is increasing.the processing disbursals is diminishing. The merchandising & A ; distribution disbursals are diminishing.

It has to pull off the cutthroat competition.Common Size Statement for B/S as On Date

Particulars 31/03/2011 31/03/2012
Capital & A ; Liabilitiess
Beginnings Of Fundss
Share capital 12.23 7.46
Reserve & A ; Surplus 44.50 27.25
Loans 9.23 44.


Current Liabilitiess 34.04 21.25
Entire beginnings of fund 100 100
Fixed Assetss 56.53 58.


Investing 3.13 3.33
Current Assetss
Inventories 18.00 18.22
Advance & A ; Sundry Debtors 14.63 11.


Cash & A ; Bank Balance 7.71 8.13
Entire Uses Of Fundss 100 100

Interpretation:The proportion of the capital is reduced. Because of increasing the loan. So that the company is to pay higher involvement rate.

The debt of the company is increased. The modesty & A ; excess of the company is cut downing. The proportion of the liability of the company is cut downing from 34.04 to 21.25.

The company has expeditiously used fix assets to augment gross revenues. One-half of the capital is invested in fix assets. The proportion of the stock list is moderate. The recovery of the measure receivable is fast. Company is seeking to cut down the hole cost.Common Size Statement of Profit & A ; Loss Account for Period

Particulars 31/03/2001 31/03/2002
Gross saless 100 100
Other income 38.58 38.


Increase/Decrease of Stock 61.42 61.07
Entire Income 100 100
Processing disbursals 1.03 0.


Packing disbursals 19.92 18.01
Power & A ; fuel Expenses 17.42 15.76
Salary & A ; Wages Expenses 7.53 8.


Repair & A ; Maintaince Expenses 2.24 2.27
Raw stuff ingestion 51.


Selling disbursals 0.19 0.17
Assorted disbursals 0.15 0.15
Entire Expenses 100 100

Interpretation:The proportion of other income is increased. So that the reduction in lessening in stock. The proportion of processing, wadding, selling, power & A ; fuel disbursals is diminishing.

The salary & A ; rewards and fix & A ; maintaince disbursals is increasing.So that company is seek to cut down their disbursals.1.3 WORKING CAPITAL MANAGEMENT:Working capital direction involves the relationship between a house ‘s short-run assets and its short-run liabilities. The end of working capital direction is to guarantee that a house is able to go on its operations and that it has sufficient ability to fulfill both maturating short-run debt and approaching operational disbursals.The direction of working capital involves pull offing stock lists, histories receivable and collectible, and hard currency.FloatFloat is defined as the difference between the book balance and the bank balance of an history. For illustration, assume that you go to the bank and open a checking history with $ 1000.

You receive no involvement on the $ 1000 and pay no fee to hold the history.Now assume that you receive your H2O measure in the mail and that it is for $ 200. You write a cheque for $ 200 and get off it to the H2O company.

At the clip you write the $ 200 cheque you besides record the payment in your bank registry.Your bank registry reflects the book value of the checking history. The cheque will literally be “ in the mail ” for a few yearss before it is received by the H2O company and may travel several more yearss before the H2O company cashes it.The clip between the minutes you write the cheque and the clip the bank cashes the cheque there is a difference in your book balance and the balance the bank lists for your checking history.

That difference is float.This float can be managed. If you know that the bank will non larn about your cheque for five yearss, you could take the $ 200 and put it in a nest eggs history at the bank for the five yearss and so topographic point it back into your look intoing history “ merely in clip ” to cover the $ 200 cheque.

Time Book Balance Bank Balance
Time 0 ( sedimentation ) $ 1000 $ 1000
Time 1 ( write cheque of $ 100 ) $ 800 $ 1000
Time 2 ( bank receives cheque ) $ 800 $ 800

Float is calculated by deducting the book balance from the bank balance.Float at Time 0: $ 1000- $ 1000 = $ 0Float at Time 1: $ 1000- $ 800 = $ 200Float at Time 3: $ 800- $ 800 = $ 0Firms can pull off hard currency in virtually all countries of operations that involve the usage of hard currency. The end is to have hard currency every bit shortly as possible piece at the same clip waiting to pay out hard currency every bit long as possible. Below are several illustrations of how houses are able to make this.

Policy for Cash Management:Here a house already is keeping the hard currency so the end is to maximise the benefits from keeping it and wait to pay out the hard currency being held until the last possible minute. Previously there was a treatment on Float which includes an illustration based on a checking history. That illustration is expanded here.Assume that instead than puting $ 1000 in a checking history that does non pay any involvement, you invest that $ 1000 in liquid investings.

Further assume that the bank believes you to be a low recognition hazard and allows you to keep a balance of $ 0 in your checking history.This allows you to compose a $ 200 cheque to the H2O company and so reassign financess from your investing to the look intoing history in a “ merely in clip ” ( JIT ) manner. By using this JIT system you are able to pull involvement on the full $ 1000 up until you need the $ 200 to pay the H2O company. Firms frequently have policies similar to this one to let them to maximise idle hard currency.Gross saless Management:The end for hard currency direction here is to shorten the sum of clip before the hard currency is received. Firms that make gross revenues on recognition are able to diminish the sum of clip that their clients wait until they pay the house by offering price reductions.For illustration, recognition gross revenues are frequently made with footings such as 3/10 net 60. The first portion of the gross revenues term “ 3/10 ” means that if the client wages for the sale within 10 yearss they will have a 3 % price reduction on the sale.

The balance of the gross revenues term, “ net 60, ” means that the measure is due within 60 yearss. By offering an incentive, the 3 % price reduction in this instance, houses are able to do their clients to pay off their measures early. This consequences in the house having the hard currency earlier.Inventory Management:Here the end is to set off the payment of hard currency for every bit long as possible and to pull off the hard currency being held. By utilizing a JIT stock list system, a house is able to avoid paying for the stock list until it is needed while besides avoiding transporting costs on the stock list. JIT is a system where natural stuffs are purchased and received merely in clip, as they are needed in the production lines of a house.

1.4 CASH FLOW Prediction:

Cash flow prognosis shows the awaited income and outgo of the concern and ensuing excess or deficit which will happen each month.

While a thorough cognition of your concern profitableness is critical, it is even more of import to cognize the province of the concern hard currency flow i.e. where your money is, where it is coming from and where it is traveling to.

Many concerns fail because they fail to command their hard currency flow.

  1. It establishes how much money is needed and when it will be needed.
  2. It helps with confronting facts and determination devising
  3. It encourages efficient usage of resources through budgeting and the analysis of over and under disbursement.
  4. It helps to guarantee that capital outgo is decently controlled ( e.g. the ‘what if ‘ state of affairs )
Cash Flow Forecast Example:
Business Name: Bloomerss Dressing
Money Business Receives ( Revenue )
Cash Receipts May Forecast June Forecast July Forecast August Forecast Entire Forecast
Estimated Gross saless 2,200 2,500 3,200 3,800 11,700
Summer Company Award 2,000 2,000
Owner Cash Contribution 100 100
Entire Cash Receipts 4,300 2,500 3,200 3,800 13,800
Money Business Pays Out ( Expenses )
Ad / Selling EXPENSES May Forecast June Forecast July Forecast August Forecast Entire Forecast
Business Card games 55 55
Circulars 350 200 550
Internet Ads 80 80 80 80 320
Entire 485 80 280 80 925
Equipment Expense May Forecast June Forecast July Forecast August Forecast Entire Forecast
Mannequin 300 300
Display Rack 180 180
Telephone 110 110
Entire Forcast 590 0 0 0 590
BANK FEES AND LICENSES May Forecast June Forecast July Forecast August Forecast Entire Forecast
Bank Fees 20 20 20 20 80
Business Registration 68 68 136
Peddlers’ License 150 150 300
Entire 238 238 20 20 516
Insurance Expense May Forecast June Forecast July Forecast August Forecast Entire Forecast
Business Insurance 125 125
Entire 125 0 0 0 125
OTHER EXPENSES May May Forecast June Forecast July Forecast August Forecast Entire Forecast
Inventory 1000 1000 800 2,800
Cash box 50 50
Fees to Events 80 160 100 100 440
Entire 1,130 1,160 900 100 3,290
Entire Outgo 2,568 1,478 1,200 200 5,446
Net Cash May Forecast June Forecast July Forecast August Forecast
Monthly excess or Deficit 1,732 1,022 2,000 3,600
Accumulative 2,754 4,754 8,354
Personal drawings -1000 -1000
Net Net income / Loss 1,732 1,022 3,000 4,600


  1. www.

  3. .

    .. /GFOA_FFAD17DevelopCashFlowReporting