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analysis and interpretation (profitability - ability to earn profit…
analysis and interpretation
liquidity- ability to meet short term debts
level
cash flow cover - measures number of times operating activities is available to cover average current liabilities
quick asset ratio- measures quick assets to quick liabilities to assess stability to meet immediate debt
working capital ratio 1:1- measures current assets to current liabilities to find the ability to meet short term debts
speed
stock turnover - average days to turn stock into sales
advertising, stock level, complementary, rotate
debtors turnover- average days for debtors to pay cash
discounts, promote, invoice, reminders
debt collectors, credit checks
creditors control- average days to pay creditors
use terms
profitability - ability to earn profit compared against a base
return on owner investment- effectiveness of OE to earn profit
debt ratio- firms assets that are financed by liabilities
return on assets- effectiveness of using assets to earn profit
assets turnover- using assets to earn revenue
net profit margin- measuring expense control by calculating percentage of sales rev retained as net profit
gross profit margin- measures mark-up
strategies-
earn revenue
advertise, stock mix, customer service, NCA
expense control
stock, staff, NCA
definitions
trends- patterns formed by changes in an item over number of periods
benchmarks- acceptable standards against which firms actual performance can be assessed
vertical analysis- expresses every item as a percentage of a base figure
variances
non financial information
nothing that relies on $ and cents in calculations
issues with financial indicators
averages
historical
different methods
limited information