* Focus on concepts * Ratio analysis * Leverage * Balance sheet/income statement * Ratios * Understand categories divided up into and know what they are telling you * Liquidity measures are looking at current assets- when we say a company is liquid we are looking at their current liabilities and how quickly we turn assets to cash and pay back the liabilities * Debt to equity * Dupont analysis: what is influencing the return ratios- gives management the opportunity to look through them * Z-score: the probability of what the likely hood the company will go into bankruptcy- manufacturing, non-manufacturing equations * You can pull off the balance sheet. * You cannot pull of the balance sheet with a publicly traded * Market price * shares outstanding (market price is not onincome statement or balance sheet…. Shares outstanding are on the equity) * issued shares-treasuring shares=outstanding shares) * issues to be aware of during ratio analysis * make sure the numbers are decent numbers- we should use audited financial statements * comparative analysis- we need to make sure that we have differences in ratios that different accounting policies aren’t different * if companies take bath write offs- huge write offs of assets- lower depreciation which turn into higher earnings * inflation impacts (competitive and trend analysis) * currency exchange impacts (competitive and trend analysis) * industry averages- throw out the caution that the companies operations fit the industry averages * do ratios on historical data, but there is no guarantee that the future will be the same as the past. Use judgment to what the future might look like. * Breakeven analysis * A company reaches break even when (When EBIT =0) you covered your fixed costs. * Quantity, sales, target volume equations * Be able to calculate for sales dollars or quantities * Contribution margin * On a per unit basis- the contribution that every unit is making to cover fixed cost and then it is the amount of pre tax profit you are earning. * On a per unit basis does it represent EBIT per unit? No- fixed costs do not go per unit… it is a pre tax profit per unit * What is the compliment of the variable cost ratio- if you take 1- variable cost ratio you get the profit contribution ratio * Profit contribution ratio and the variable cost ratio must equal 1. * Profit contribution ratio-profit per dollar of sales ** before fixed costs * Leverage- you must have fixed costs * the higher the level of fixed costs the degree of operating leverage is higher * direct relationship with fixed costs & leverage * the closer we operate to ebit the higher the leverage is * if the EBIT is 0 the DOL is undefined (infinite) * DOL of 1 is when there is no leverage * When we are at breakeven we are just covering our fixed costs so we have a high degree of risk because there is a big chance we will suffer a loss. * The further we get away from EBIT (farther away from 0) the DOL falls because the fixed costs become a
O S Mukundan
CONCEPT OF VARIABLES AND KEY VARIABLES
In an organization, a variable is considered as an ordinary indicator of any business activity, whose sudden and unpredictable change warrants immediate action by the management. The nature of task, the technology and the environment in which the organization operates are the factors which greatly influence the identification of variables. An important function of an variable is that they indicate to the management the necessity…
1. Cost volume profit analysis- calculate breakeven point, contribution margin, fix cost, variable cost, margin cost, net profit
High–low method to separate fixed costs from variable costs
STEP 1: Calculate the variable cost per unit
Variable cost per unit = Change in total cost ÷ Change in volume of activity
STEP 2: Calculate the total fixed cost
Total fixed cost = Total mixed cost – Total variable cost
STEP 3: Create and use an equation to show the behaviour of a mixed cost
1. What is the purpose of financial statement analysis? It show trends and relationships. These also help predict the future, show weaknesses, strengths. The ratios usually are compared to other companies within the industry and industry average to see where the company stands.
2. If a company had sales of $2,587,643 in 1998 and sales of $3,213,456 in 2003, by what percentage did sales change during this time period…
Activity Based Costing (ABC) is an accounting methodology which assigns manufacturing costs in a more logical manner by taking into account not only the production costs in terms of machine time and labor but the additional and often hidden costs associated with production. These hidden costs if not properly allocated distort the actual costs of production. The hidden costs which include, engineering, machine setups and quality control are incurred within specific models during…
Accounting ratios 5-6
Financial information 7-8
Cash management 9-10
Pay back periods ………………………………………………………………………………..12
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…
performance. Financial accounting: Provides information for external users: Investors, Creditors, Government, The public. Includes: Financial statements. Managerial a: Provides information for internal users: Managers. Includes: Budgets, Forecasts. Business types: proprietorship(proprietor-one, himself liable for company), partnership(partners-two or more, partners are liable), LLC(members, members are not personally liable. No need to pay tax.), corporation(stockholders usually many, stockholders are…
Compute and interpret the contribution margin ratio under each approach.
The formula for calculating the contribution margin ratio is:
Sales – Variable Costs
standard of living improves. Hence, as income of the consumer increases, he/she is more likely to purchase frozen food products (Mankiw & Reis, 2010).
Factors of Change
In order to determine the likely factors those have caused the change in business operations, we search for aspects of market which would influence such a change. Since the demand of microwaveable, frozen low-calorie food products is directly related to the demand of microwaves and refrigerators, this is a vital factor of influence…
The Cost-Volume-Profit analysis (CVP) for Snap Fitness provides an evaluation of its profits as costs and volume changes. As the owner of a Snap Fitness franchise, decisions about selling prices, product mix, and maximizing the use of the fitness center depends on CVP. A CVP analysis classifies cost as variable and fixed, and calculates a contribution margin. Relevant information identified in the analysis is the total monthly fixed costs of Snap Fitness…
banks. If you can provide a strong business plan.
• Find business partner
these is one of the popular business loans and it can be obtained by those who do not qualify for traditional financing options.
There are several innovative companies that will roll your retirement plan into a business loan. There are no penalties associated with this type of retirement fund conversion. This type of loan enables you to invest in a business without mortgaging your home or…