...potential of improved fixed asset management is often overlooked. It’s difficult to find the time and tools to devote the attention to fixed assets that they deserve. Yet assets like land, buildings, transportation, and manufacturing equipment, represent the largest investments most companies make. Sound fixed asset management can yield substantial tax savings in depreciation deductions. Conversely, sub-optimal fixed asset practices can threaten the accuracy of financial reports and negatively impact your bottom line body : There is nothing more critical to effective management of fixed assets than beginning with an accurate fixed asset inventory. Without it, no amount of added processes, controls, or correct calculations can ensure the accuracy of fixed asset accounting. The only reliable way to verify and validate the fixed asset information is to conduct a physical inventory. Eliminate “ghost” assets: A “ghost” asset is property that is lost, stolen, or unusable, but is still listed as an active fixed asset in the system.If 10-30 percent of fixed assets on the books are ghost assets, a company might be overpaying taxes and insurance on those assets by up to 30 percent. Ghost assets that are not identified can cause lost productivity because missing or unusable assets are not available when needed. Tag assets appropriately: When a company owns multiple fixed assets that are nearly identical, it can be very easy to make mistakes by creating duplicate asset records or failing...
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...| Operating Expenses: | | | Rent | | $438,500.00 | Insurance | | $173,000.00 | Depreciation Expense | | $146,625.00 | Interest Expense | | $460,000.00 | Salaries Expense | | $989,400.00 | Operating Expenses: | | $2,207,525.00 | Gains or Losses | | $190,000 | Income before taxes | | $657,625.00 | Income taxes | | $157,830.00 | Net income | | $499,795.00 | 2. Statement for Cash Flows for Allgomotive Inc. | | For the period ending October 31st, 2015 | | | | | Cash Flow from Operations | | $499,795.00 | Add back: Depreciation | | $146,625.00 | Add back: Losses | | $190,000.00 | Subtract changes in Accounts Receivable | ($280,000.00) | Subtract changes in Inventory | | ($2,828,500.00) | Subtract changes in Prepaid Rent | | ($11,500.00) | Subtract changes in Prepaid Insurance | $23,000.00 | Add changes in Accounts Payable | | $149,500.00 | Add changes in Salaries Payable | | $92,000.00 | Add changes in Taxes Payable | | $58,470.00 | Add changes in short term Loan Payable | $1,340,000.00 | | | | Net Cash Provided from Operations | | ($620,610.00) | | | | Cash Flow From Investing | | | Capital Expenditure on PPE | | ($705,000.00) | Sale of PPE | | $10,000.00 | Capital Expenditure on Patent | | ($250,000.00) | | | | Net Cash Used for Investing | | ($945,000.00) | | | | Cash Flow From Financing | | | Increased Loan | | $2,340,000.00 ...
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...TABLE OF CONTENT Chapter I 1.1. Introduction Chapter II 2.1. Liquidity Ratio 2.1.1 Current Ratio 2.1.2 Quick or Acid Test Ratio 1. 2. 3.1. 3.2. Asset Management Ratio 2. 3.1. 3.2. 2.2.1 Inventory Turnover Ratio 2.2.2 Fixed Asset Turnover Ratio 2.2.3 Days Sales Outstanding 2.2.4 Total Asset Turnover Ratio 3.3. Debt Management Ratio 2.3.1 Debt Ratio 2.3.2 Times-Interest-Earned-Ratio 3.4. Profitability Ratio 2.4.1 Operating Margin 2.4.2 Profit Margin 2.4.3 Return on Total Asset 2.4.4 Basic Earning Power Ratio 2.4.5 Return on Common Equity Chapter III 3.1. Calculation 3.1.1 Liquidity Ratio 3.1.2 Asset Management Ratio 3.1.3 Debt Management Ratio 3.1.4 Profitability Ratio 1. 2. 3. 3. 4.5. 4.6. Trend Analysis Appendix CHAPTER I INTRODUCTION Pharmaniaga Berhad, the largest integrated local healthcare company has established the reputation of a corporation that delivers value to its clients and stakeholders through impeccable quality products and services. The Group is driven by its goal to enrich the lives of the communities it serves while being guided by its business philosophy of doing business with a conscience. Hence, this cover concept coupled with the theme...
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...2008 with respect to all assets, (2) that all assets must grow at the same rate as sales, (3) that accounts payable and accrued liabilities also will grow at the same rate as sales, and (4) that the 2008 profit margin and dividend payout will be maintained. Under those conditions what would the AFN equation predict the company’s financial requirements to be for the coming year? Solution Additional Funds Needed (AFN) are also known as External Funding Required. In the following, the AFN equation is displayed for 2009: AFN=(A^*/S_0 )∆S-(L^*/S_0 )∆S-M(S_1)(RR) AFN=($1000/$2000)$500-($100/$2000)$500-0.0252($2500)(($50.4-$15.12)/$50.04) AFN=0.5*$500-0.05*$500-0.0252($2500)(0.7) AFN=$250-$25-$44.1=$180.9 Answer: NWC will need $180.9 million. Section B Consultations with several key managers within NWC, including production, inventory, and receivable managers, have yielded some very useful information. (1) NWC’s high DSO is largely due to one significant customer who battled through some hardships the past 2 years but who appears to be financially healthy again and is generating strong cash flow. As a result, NWC’s accounts receivable manager expects the firm to lower receivables enough to make the DSO equal to 34 days without adversely affecting sales. (2) NWC was operating a little below capacity, but its forecasted growth will require a new facility, which is expected to increase NWC’s net fixed assets to $700 million. (3) A relatively new inventory management system (installed...
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...UNIVERSITY MALAYSIADATE : 7th FEBRUARY 2015 | Assignment: 1) Calculate the key financial ratios for Company High Profits Berhad for the year 2013. (20 marks) | Category | Financial Ratio | Formula | | | | | | | Liquidity | 1) | Current Ratio | Current Assets / Current Liabilities | | | | | | | | 2) | Quick Ratio | (Current Assets – Inventory) / Current Liabilities | | | | | | | | | | | | | 3) | Net Profit Margin | (Profit After Tax / Sales) x 100 | | | | | | | Profitability | 4) | Return on Total Assets | (Profit After Tax / Total Assets) x 100 | | | | | | | | 5) | Return on Equity | (Profit After Tax / Shareholders Equity) x 100 | | | | | | | Debt | 6) | Debt Ratio | (Total Liabilities / Total Assets) x 100 | | | | | | | | 7) | Debt-Equity Ratio | (Long Term Liabilities / Shareholders Equity) x 100 | | | | | | | | | | | | | 8) | Inventory Turnover | Cost of Goods Sold / Inventory | | Asset | | | | | | 9) | Fixed Asset Turnover | Sales / Net Fixed Assets | | Management | | | | | | | | | | | 10) | Total Asset Turnover | Sales / Total Assets | | | | | | | | | | | 2) Evaluate the financial performance of Company High Profits Berhad for 2013 against the Industry Average. (20 marks) | Category | Financial Ratio | Industry Average | | | | | | | Liquidity | 1) | Current Ratio...
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... |20% | The inventory turnover ratio for the company is |(a) |2 times | |(b) |3 times | |(c) |5 times | |(d) |6 times | |(e) |8 times. | Sol. Current assets – Current liabilities = 90,000 [pic] Current assets = 1.5 Current liabilities 1.5 Current liabilities - Current liabilities = 90,000 Current liabilities = Rs.1,80,000 Current assets = 1.5 x Current liabilities = 1.5 x 1,80,000 = Rs.2,70,000 Now, Quick ratio = [pic] Quick assets = 0.9 x Current liabilities = 0.9 x 1,80,000 = Rs.1,62,000 Inventory = Current assets – Quick assets = 2,70,000 – 1,62,000 = RS.1,08,000. Gross profit margin = 20% = 0.2 Gross profit = 0.2 x Sales COGS = Sales – Gross profit = 0.8 Sales = 0.8 x 8,10,000 = Rs.6,48,000 Inventory turnover = [pic] Hence (d) is the answer....
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...Solved! 1. Transactions. NLF Shares are issued for cash. Goods for inventory are sold for cash. Goods from inventory are sold on account. A fixed asset is sold for cash for less than book value. A fixed asset is sold for cash for more than book value. Corporate income tax is paid. Payment is made to trade creditors. Cash is obtained through a short-term bank loan. Cash is obtained through a long-term bank loan. A cash dividend is declared and paid. Accounts receivable are collected. Merchandise is purchased on account. Cash advances are made to employees. Minority interest in a firm is acquired for cash. Equipment is acquired for cash. + + + + + 0 0 0 + – 0 0 0 – – WCR 0 – + 0 0 + + 0 0 0 – 0 + 0 0 NSF – – 0 – + + 0 – + – 0 + + + NET PROFIT 0 + + – + 0 0 0 0 0 0 0 0 0 0 3. Reconstructing a balance sheet. Sales 20 days of sales 360 days of sales Accounts receivable 40 days of sales Inventory Inventory = $400,000 = ($400,000/20) × 360 = $7,200,000 = ($7,200,000/360) × 40 = $800,000 = Sales/6 = $7,200,000/6 = $1,200,000 Working capital requirement (WCR): WCR = .20 × Sales = .20 × $7,200,000 = $1,440,000 Accounts payable Since WCR Accounts payable = (Accounts receivable + Inventory) – Accounts payable, = (Accounts receivable + Inventory) – WCR = ($800,000 + $1,200,000) – $1,440,000 = $560,000 Net fixed assets Net fixed assets Net fixed assets = Total assets – Current assets = Total assets – Inventory – Accounts receivable – Cash = $5,000,000 – $1,200,000 – $800,000...
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...PRACTICE EXERCISES PE 17–1A Accounts payable $8,400 increase ($78,400 – $70,000), or 12% Long-term debt $5,760 increase ($101,760 – $96,000), or 6% PE 17–1B Temporary investments $10,800 increase ($70,800 – $60,000), or 18% Inventory $11,000 decrease ($99,000 – $110,000), or –10% PE 17–2A Amount Percentage Sales $500,000 100% ($500,000 ÷ $500,000) Gross profit 140,000 28 ($140,000 ÷ $500,000) Net income 40,000 8 ($40,000 ÷ $500,000) PE 17–2B Amount Percentage Sales $600,000 100% ($600,000 ÷ $600,000) Cost of goods sold 480,000 80 ($480,000 ÷ $600,000) Gross profit $120,000 20% ($120,000 ÷ $600,000) PE 17–3A a. Current Ratio = Current Assets ÷ Current Liabilities Current Ratio = ($190,000 + $150,000 + $260,000 + $300,000) ÷ $600,000 Current Ratio = 1.5 b. Quick Ratio = Quick Assets ÷ Current Liabilities Quick Ratio = ($190,000 + $150,000 + $260,000) ÷ $600,000 Quick Ratio = 1.0 PE 17–3B a. Current Ratio = Current Assets ÷ Current Liabilities Current Ratio = ($140,000 + $60,000 + $40,000 + $80,000) ÷ $160,000 Current Ratio = 2.0 b. Quick Ratio = Quick Assets ÷ Current Liabilities Quick Ratio = ($140,000 + $60,000 + $40,000) ÷ $160,000 Quick Ratio = 1.5 PE 17–4A a. Accounts Receivable Turnover = Net Sales ÷ Average Accounts Receivable Accounts Receivable Turnover = $560,000 ÷ $40,000 Accounts Receivable Turnover = 14.0 b. Number of Days’ Sales in Receivables = Average Accounts Receivable ÷ Average Daily Sales ...
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...asking for information on the following topics: adjusting lower cost of market inventory on valuation; capitalizing interest on building construction; recording gain or loss on asset disposal; and adjust goodwill for impairment. This paper will strive to answer these questions for the client. Adjusting Lower Cost of Market Inventory on Valuation One of the requirements of the Generally Accepted Accounting Principles (GAAP) is that inventory be recorded at lower of cost or market rule, also known as LCM. In a company’s’ financial statements, assets are generally stated in the financial statements according to the cost principle. However, when it comes to inventory, cost principle is abandoned and lower of cost or market rule takes its place. The LCM states that inventory should be measured at the lower of cost or market value (Accounting Explained). What market value means basically is the replacement cost of the company’s inventory. This replacement cost can be in the form of a purchase cost or a manufacturing cost; simply stated, market value is the amount a company would have to pay to acquire their inventory of the same quantity and quality through purchase or through manufacturing. There are upper limits (ceiling) as well as lower limits (floor) on the market value of inventory. These are fairly simple to figure. The upper limit is the net realizable value (NRV) of a company’s inventory. The NRV equals the expected selling price minus the sum of the expected cost...
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...The Case of the Unidentified Industries - 1995 Solution: In order to find out the exact firm by analysing the financial structure of typical firms, first we need to separate those firms which have zero inventory turnover (A, B, F and H) from those firms which have zero debt ratio which in our case are (E, H and J) and we use the information to narrow down the possibilities of each firm. In this case there are three groups of companies: 1) Firms having zero inventory turnover. 2) Firms having zero debt. 3) Firms having all financial ratios given. 1) Firms having zero inventory turnover: Under the category of zero inventories, there are four companies. The nature of these companies show that they are not involved in any production, but they provide services to the people and from services they generate cash. Each one with the name and reason is mentioned below. Firm A. Commercial Bank: The financial structure of (A) firm shows that it has zero inventory turnover and high receivables collection period. Banks usually have a large amount of receivables because they lend money to the individual people and a company due to which the average number of days, which in this case is very high, requires to convert receivables into cash is very high. Its financial structure also shows that the firm has borrow money from outside to pay debt to its customers. Firm B. Advertising Agency: This firm has very high receivables and payables due to one reason or the...
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...charging slightly higher prices or have found cheaper suppliers of tires. Interest expense as a % of sales has decreased due to how they are paying off their original warehouse loan in $125,000 increments. Asset Turnover Assisting the improving profit margin Tire City has seen an improved asset turnover ratio. It has increased every year from 2.47x in 1993, 2.60x in 1994, and 2.62x in 1995. The main improvement for this increase is fixed asset turnover, which improved in 1995 to 9.65x, from 8.93x in 1994. The increase is a result of decreasing planet & equipment as a % of sales. One can conclude that the company purchased a little more plant & equipment; however sales increased significantly thereby increasing fixed asset turnover. A slightly offsetting factor was A/R turnover, it has decreased slightly from 6.58x in 1994, to 6.44x times in 1995. This is due to a longer collection time, which has rose from 55.5 days in 1994, to 56.7 days in 1995. Tire City’s inventory turnover has also slightly declined, from 6.47 in 1994, to 6.22 in 1995. This is due to a higher inventory period, in 1994 inventory was sold off in 56.4 days, in 1995 this has slightly increased to 58.7 days. This is a result of a higher inventory as a % of sales in 1995 compared to 1994, in 94’ inventories were 9.03% of sales, in...
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...= $115,000; tangible net fixed assets = $1,660,000; inventory = $301,000; notes payable = $120,000; accumulated retained earnings = $1,246,000; long-term debt = $861,000. (Be sure to list the accounts in order of their liquidity.) CORNELL COP. Balance Sheet Assets Cash Accounts receivable Inventory Current assets Tangible net fixed assets Intangible net fixed assets Total assets Liabilities Accounts payable Notes payable Current liabilities Long-term debt Total liabilities Common stock Accumulated retained earnings Total liabilities & owners' equity $ 220,500 120,000 $ 340,500 861,000 $ 1,201,500 401,500 1,246,000 $ 2,849,000 $ 143,000 115,000 301,000 $ 559,000 1,660,000 630,000 $ 2,849,000 Worksheet Learning Objective: 02-01 The difference between accounting value (or “book” value) and market value. Prepare a 2011 balance sheet for Cornell Corp. based on the following information: cash = $143,000; patents and copyrights = $630,000; accounts payable = $220,500; accounts receivable = $115,000; tangible net fixed assets = $1,660,000; inventory = $301,000; notes payable = $120,000; accumulated retained earnings = $1,246,000; long-term debt = $861,000. (Be sure to list the accounts in order of their liquidity.) CORNELL COP. Balance Sheet Assets Cash Accounts receivable Inventory Current assets Tangible net fixed assets Intangible net fixed assets $ 143,000 ± 2% 115,000 ± 2% 301,000 ± 2% 559,000 ± 2% 1,660,000 ± 2% 630,000 ± 2% $ Total assets Liabilities Accounts payable...
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...2013. The values are compared to previous performance of the company; that is December 2012. The ratios that are evaluated are as follows: * Current Ratio * Quick Ratio * Days’ Sales Outstanding Ratio * Fixed Asset Turnover * Inventory Turnover Ratio * Total Asset Turnover * Debt Ratio * Operating Margin * Profit Margin * Basic Earning Power * Return on Assets Current Ratio Definition Current ratio is the ratio of current assets of a business to its current liabilities. It is most widely used to test liquidity of a business and it measures the ability of a business to repay its debts over the period of 12 months. Formula Current Ratio = | Current Assets | | Current Liabilities | Results & Analysis December 2012: 1.59 June 2013: 1.69 Current Ratio depicts the ratio of Assets to Liabilities. If the result is greater than 1 than it’s a good sign as Assets are greater than Liabilities. In ECI’s financial statement, in December and June the Assets have been greater than liability that is a positive sign. However in these 6 months there has not been great changes in assets and liabilities of the company as the difference is 0.1. The assets need to grow further for stabilization and improvement of the company. ECI can potentially grow to 2:1 and 3.5:1 in the long run. Quick Ratio Definition Quick ratio is the ratio of the sum of cash and...
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...The relative difference between the calculation of the quick ratio and the current ratio is the inventory account; the quick ratio does not include inventory or prepaid expenses, inventory being the most significant. Therefore, the cause of the divergence between the quick ratio and the current ratio lies in the inventory account. The company's inventory turnover rate has declined from 4.91 in 2006 to 3.42 in 2008. Since sales have increased by 7% since 2006 and the company's fixed asset turnover ratio has steadily increased over the last three years, this rules out the possibility that the declining inventory turnover rate is being affected by declining sales. Since declining sales are not the reason behind the decline in inventory turnover, the cause is likely that the company has been investing in inventory at a faster rate than they are selling product. The company's use of financial leverage has declined over the last three years. This is evident by evaluating the company's total debt to total assets ratio and long-term debt to total assets ratio. The company's total debt to total assets ratio declined from 51% in 2006 to 46% in 2007, and then to 41% in 2008. The company's long-term debt to total assets ratio declined from 31% in 2006 to 27% in 2007, and then to 24% in 2008. The decline in the company's long-term debt to total assets ratio indicates that a reduction in long-term debt contributed greatly to the decrease in the company's total debt to total. ...
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...the basing on some financial results can lead to the investigate activity. At stand point in the year 2005, we had an analysis about Costco in period 2001-2005, then use these figures to make a decision whether or not invest in Costco in the next period. II. ANALYSIS To avoiding the problem of comparing companies of different sizes in Stock market, one of the most effective ways is to calculate and compare the financial ratios. Capture this trend, we are using ratio to analysis and predict future financial condition of COSTCO. Furthermore, the results of this analysis would be used to make the investigation more easily. After work with numbers and figures, we evaluated them into five groups of meaning: abilities in liquidity, assets management, debts management, profitable and market value. All the data is from Annual report of Costco Wholesale Corporation, it make the results more impartial and realistic. 1....
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