Contents
Intruduction 3
Tasks 4
Accounting ratios 5-6
Financial information 7-8
Cash management 9-10
Fundings 11 Pay back periods ………………………………………………………………………………..12 Budgets ………………………………………………………………………………...…....13-14
This assignment is to show how to understand where money moves within a business how we control and make decisions based on those controls, the techniques used to manage working capital and other financial controls that may determine the longer term success for a business which plays a vital role to failure or a thriving business. These will include Accounting ratios the purpose and why they are vital information for the business, to include an example calculation using balance sheet and profit and loss accounts for XYZ Distributions of current ratio, quick ratio and ROCE (return on capital employed), detailed Financial information to include gross and net profit, cash flow statement, direct and indirect cost, break even analysis, variable and fixed cost within a given environment, Cash management process to include actions taken to recover debt, debtor days and its calculation, Pay back periods and Funding, different types of funding long term and short term investments. types of Budgeting controls and advantages and disadvantages they have, and how we manage them
Task
Out come
Comments
A
Accounting ratios
B
Financial information
c
Cash management
D
Funding
E
Pay back periods
F
Budgeting controls
The role of accounting ratios is to provide businesses with a way to understand its financial position, find weaknesses and opportunities, and make reasonable forecasts. Comparing numbers side-by-side does not always provide businesses with a way of determining if their financial position has become better or worse. Instead, accounting ratios allows businesses to place data in manageable terms in order to better understand their position. This also allows businesses to break data down so that they can recognize any weaknesses or opportunities. While most accounting ratio is used to determine the business’s current position, some ratios can be used to make financial prediction. The use of accounting ratios is commonly asked for by decision makers Chief executives, shareholders, banks, employees, creditors, anyone who has a vested interest in the company.
The financial ratios break up into four categories
Profitability
Liquidity
Gearing
Financial markets
Profit margin
Current ratio
Gearing
Return on shareholders investments
Profitability
Acid or Quick Ratio
ROCE
Stock turnover
Credit period
Current ratio of XYZ Distributions is 1.94%
The current ratio is an effective tool that is often used to get an accurate picture of the financial stability of a company. The calculation of a current ratio only requires that access to two accurate pieces of information is present – the total of current liabilities held by the company, as well as the value of current assets. By comparing the two figures and arriving at the current ratio for the company, it is possible to plan for future operations and determine ways to improve the overall condition of the business.
One of the most important facts that a current ratio will reveal is the current status of a company to honour short-term debt obligations. Generally, a company that is in good financial condition will have a high ratio of assets to liabilities.
Quick ratio of XYZ Distributions is 1.36 %
One of the most reliable financial formulas used to assess a company's liquidity is the quick ratio calculation, sometimes known as the acid test ratio. In theory, the sale of a company's assets would fully offset any outstanding short-term debt, so that the company can continue to operate. Executive managers, financial analysts, investors, and lenders all rely on the formula as a standard accounting
