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CHAI JIA NI
960411-14-5238
202409
SEPTEMBER 2015
Content
No
Content
Page
1.0
Introduction
2-3
2.0
Task 1
4-7
3.0
Task 2
8-11
4.0
Conclusion
12
5.0
Reference
13
6.0
Coursework
14-18
Introduction
Page 1 of 18
Every organization needs strong financial leadership, and our BA Accounting and
Financial Management will set you on the road to success.
Accounting is more than mathematical techniques. The experienced academic team at
Sheffield University Management School will help you see the bigger picture, so you
can take your career in any direction you choose.
This multi-disciplinary approach means that you learn practical skills to help you land
the right job, as well as gaining the rigorous academic knowledge that you require to
progress. We'll also put things into context - helping you to understand the role of
accounting and financial management within an organization is key to this course. You'll
learn how it affects everything, from budgeting and control to environmental issues.
The first year gives you a broad understanding of accounting, built around core modules
such as Accounting Theory and Practice, as well as Introduction to Financial
Accounting and Introduction to Management Accounting. Well encourage you to start
thinking about life in the workplace with modules such as Introduction to Behaviors at
Work and Professional Self-Management. This structured, supportive process will help
you to reflect on your own learning, performance and achievement in preparation for
your first job. Our students quickly become familiar with the challenges faced by
professional accountants. As your confidence grows, you'll develop your own views on
how to approach these challenges.
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J plc supplies and fits car types, exhaust pipes and other components. The company has
branches throughout the country. Roughly 60 per cent of sales are for cash ( retail sales).
The remainders are credit sales made to car hire companies and large organizations with
fleets of company cars (business sales). Business sales tend to be more profitable than
retail and the company is keen to expand in this area. There is, however, considerable
competition. Branch managers are responsible for obtaining business customers and
have some discretion over terms of trade and discounts.
The companys computerized accounting system has recently produced the following
report for the manager of the Eastown branch for the six month andded 30 September
20X5:
Eastown
22%
38%
9%
19%
63 days
37days
52 days
49 days
The Eastown branch manager has only recently been appointed and is unsure whether
his branch appears well managed. he has asked for your advice.
You are required to compare the performance of the Eastown branch with the average
for all branches. Suggest reasons for the differences you identify.
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From the ratios provided, you can obtain venous indicators of whiner the Eastown
branch is being property managed:
Return on capital employed
Eastown has better return, it 6% more than overall average. This shows that it is being
managed well. However, as all the branches are in the same company, some caution is
needed in that analysis. While a consistent basis for the figures in the ratio is probable.
There is no guarantee that all have similar assets profiles, either in nature or in age. The
ratio will be distorted unless all the branches have similar asset profiles. Further
information will be needed.
Gross Profit
Over 7% lower than the overall average, which suggest that Eastown is not being well
managed and doing earning lower profit than average. However, Eastown branch are
competing locally and has to cut prices and offer incentives to retain and expand its
customer base, so this profit could be arisen. We will need more information.
Page 5 of 18
The Eastown is spending 3% more than average on promotion. Actually this could be an
indicator of poor management as it is consistent with the above suggestion. As the
branch may have been competing locally, this is made above under gross profit. Of
course, promotion costs do not directly impact gross profit. Further information will be
needed.
Wages/Sales:
Eastown is spending 5% more on wages than average, this is another possible indicator
of poor management. However, as a result of employing more staff, it is also consistent
with an attempt to retain and expand its customer base through an increased level of
service. Further information will be required.
Accounts receivable turnover:
Eastown allows its customers 11 more days to settle their accounts than the average.
This is another possible indicator of poor management. However, it is also consistent
with an attempt to retain and expand its customer base through an increased level of
service. This is a result of employing more staff. Further information will be needed.
Inventory turnover
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Turning over the stock virtually will be quicker than the average. Eastown give a lesser
time, which is 12 days earlier. This suggest that the management is doing a good job.
This suggests a good management of this aspect of working capital. However, it may be
caused by inefficient buying policies. This are causing inventory shortages and
indirectly loss of customers. More information will be needed.
Overall:
Compared to the average from above, the ratios of comparison shows that Eastown is
doing a higher cost and lower profit. This could have high possibilities that Eastown is
having a poorer management. However, the major reason for this conditions may due to
the environment in which the branch is operating. For instant, it may face some
competition, it may face some price-cutting competitor. Maybe a competitors need to
control over debtors appears weak. The lower inventory turnover period is the only
positive result. This could also be an indication that mismanagement is occurring.
Regarding the quality of management of the branch, the ratios in themselves are not
sufficient to make conclusion to any firm. However, they do indicate questions that
should be asked and points that should be raised if an objective view on the quality of
the branchs management is to be reached.
Task 2
Page 7 of 18
You are presented with the following information relating to the following information
relating to Messier plc
Year to 31 December
Income statement
Turnover, all on credit terms
Cost of sales
Gross profits
Profit before taxation
Balance sheet 31 December :
Non-current assets at cost
Less Accumulated depreciation
Net book value
Inventory at cost
Trade account receivables
2011
$000
2012
$000
1,300
650
650
115
1,400
770
630
130
850
510
340
105
142
850
595
255
135
190
Required:
(a) Using the historical cost financial statements and stating the formula you use.
Calculate the following accounting ratios for both 2011 and 2012:
(i) Gross profit percentage;
(ii) Net profit percentage;
(iii) Inventory turnover, stared in day;
Page 8 of 18
85
Year to 31.12.2012
111
(ii) Calculate the additional depreciation charge required to finance the replacement of
non-current assets at their replacement cost. The companys depreciation policy is to
provide 10% per annum on original cost, assuming no residual cost. The replacement
cost of not current assets at 31 December was as follow;
2011 $1,140 millions
2012
$1,200 millions
(iii) Based upon these two inflation adjustments, why may it be misleading to compare a
companys result for one year with that of another without adjusting for changes in
general (RPI) or specific inflation?
(a)
Page 9 of 18
2011
650
1300
Gross profit
Revenue
x 100%
630
1400
x 100%
=45%
130
1400
x 100%
x 100%
=50%
115
1300
x 100%
x 100%
Inventory
Cost of sales
2012
=8.8%
105
650 x 365
=9.3%
135
770 x 365
=59days
142
1300 x 365
= 64days
190
1400 x 365
= 40days
= 50days
x 365
x 365
1300
340
1400
255
Revenue
Noncurrent assets at net book value
=3.8times
=5.5times
(b) (i)
Revenue (millions)
Historical cost
2011
1300 x
=1698
2012
111
85
1400 x
111
111
=1400
Page 10 of 18
(ii)
Additional adjustment for depreciation
1140 x
10
100
1200 x
10
100
=120millions
85millions
85millions
114 - 85 =
120 85 =
29millions
29millions
Page 11 of 18
Conclusion
International Accounting Standards Board (IASB). IFRS becoming more widespread on
the international scene, consistency in financial reporting has become more prevalent
between global organizations. While financial accounting is used to prepare accounting
information for people outside the organization or not involved in the day-to-day
running of the company, management accounting provides accounting information to
help managers make decisions to manage the business.
Financial accounting (or financial accountancy) is the field of accounting concerned
with the summary, analysis and reporting of financial transactions pertaining to a
business. This involves the preparation of statements available for public
consumption. Stockholders, suppliers, banks, employees, government, business owners,
and other stakeholders are examples of people interested in receiving such information
for decision making purposes.
Accounting is facilitated by accounting organizations such as standard-setters,
accounting and professional bodies. Financial statements are usually audited
by accounting firms, and are prepared in accordance with generally accepted accounting
principles (GAAP). GAAP is set by various standard-setting organizations such as
Page 12 of 18
the Financial Accounting Standards Board (FASB) in the United States and the
Financial Reporting Council in the United Kingdom.
Reference
management
https://uwaterloo.ca/find-out-more/programs/accounting-and-financial-
management
https://en.wikipedia.org/wiki/Accounting
Page 13 of 18
BBA 2004
COURSEWORK
ACCOUNTING AND FINANCIAL MANAGEMENT
CHAI JIA NI
960411-14-5238
202409
SEPTEMBER 2015
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companies which cannot. Is that sensible? What chance is there for the development of
the country's own home-based industries if the outside companies constantly take all the
best brains and most able people?
In such a case it would probably make more sense for the multinational
company to pay wages more in keeping with the particular economy, and to help that
country in other ways such as by improving the health care generally for all, better
education for all, and so on. Obviously, a topic such as this will engender discussions
and arguments for some considerable time.
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