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state the importance of gearing in accountinggearing is one of the most extensively used terms in accounting gearing is the relationship between debt
illustrate the meaning of gearing gearing is the relationship between equity anddebt debt is typically long term liabilities that the organisation
differences in working capital for different industries manufacturingretailserviceinventorieshigh volumewip and finished goodsgoods for
what is the meaning of over-capitalisationit is the opposite of over trading it means a company has a large volume of inventories trade receivables
state the concept of overtradingovertrading can result in insolvency which means companies have severe cash flow problems this means that a thriving
what are the remedies for overtradingshort-term solutions speeding up collection from customers slowing down payment to suppliers maintaining lower
determine the symptoms of overtradingsymptoms of overtrading are- fast sales growth increasing trade payables increasing trade receivablesfall in
state the term- overtradingovertrading takes place when a company has insufficient finance for working capital to support its level of trading
define the meaning of overtradingwhen a company is trading at a very fast pace it would be
working capital cycle in a manufacturing businessaverage time raw materials are in stock raw materialspurchases x 365 days plus time taken
working capital cycle for a tradeinventories days time inventories are held before being sold plus trade receivables days how long the
working capital cycle operatingtradingcash cycleit is the time between paying for goods supplied and final receipt of cash from their sale it is
what is inventory turnoverthe shortcoming of this ratio is that average calculation based on beginning and year-end inventory may not represent
inventory daysaverage inventorycost of sales x 365daysaverage inventory can be arrived by taking this years and last years inventory values and
determine the limitations of trade receivable days ratio year-end trade receivables may not be representative of the year credit sales are vat
explain the term- trade receivable days turnoveryearend trade receivablescredit sales or turnover x 365daysit is the average length of time
what are the limitations oftrade payable days ratio year-end trade payables may not be representative of the yearcredit purchases are vat exclusive
what is the trade payable days turnoveryear-end trade payablescredit purchases or cost of salesx 365daysthis is the length of time taken to
state about the quick ratio or acid testquick ratio current assets less inventories current liabilitiestimesthis ratio measures
determine current ratio or working capital ratioca current assetscurrent liabilities timescurrent ratio measures the short term solvency or
wha is asset turnover- performance ratiosasset turnover turnover total assets or capital employedthis demonstrates how much sales are generated for
determine the name of some profit margin ratiosother profit margin ratios can also be computed gross profit turnover profit after tax turnover
operating profit marginoperating profit margin pbit turnover x 100this is the ratio of operating profit to turnover or sales a
what is performance ratiosrocereturn oncapital employed roce profit before interest and tax pbit capital employed 100roce measures profitability
exam technique for analysing performancethe below steps must be adopted when answering a question on analysing performancestep 1 review