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| Words: 503 | Submitted: 06-Oct-2012
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ACCOUNTING SAC – PART 1
The profit and loss statement shows there the sales had increased in 2012 in comparison to 2010, however there was also an increase to supplying at around 5.9% which lead to a decrease of a terrible 7% for net profit ratio.
The gross profit ratio is also unfavourably affected as the supplier increase decreased gross profit by 8.3% in comparison to 2011.
The return on assets was lowered by approximately 12% which shows that the company should be make better use of their assets to ensure a good secure business.
The return on investment is unfavourable, it reveals a 31% decrease from 2011 to 2012 that may be suggesting bad planning, needing more effective methods to build up a strong backbone.
Operating expenses are shown to be favourable, because the decrease of 3.7% in 2012.
Basically, the business’s profitability decreased unfavourably. However, the operating expense ratio kept low. This meant that the decrease on average mark up on sales is the main reason for the decrease on profitability.
Decreasing in stock of $15127 between 2011 and 2012 lead to a chain reaction causing a decrease in working capital ratio of 0.4.
Quick assets of has only made a small change, not effective enough to be of use, but never the less still a slight positive.
Revenue has improved and is a small strength within the company, however its expenses like interest had increased from the previous year.
Cash flow ratio reveals a decrease from 2011 of 0.4.
Creditor payments had increased by almost 6% in 2012, which would be a factor that would explain the lack of revenue in the business.
The most significant change in liquidity is that the surplus cash flow amount decreased 61.7%. The main reasons are the decrease on profit and increase drawings. Generally, the liquidity of the business decreased slightly.
ACCOUNTING SAC – PART 1 – ALLEN CHEN P2
Like most of the other trends, it’s unfavourable for stock turnover, showing a 30% decrease revealing that Racing Fashions is having a lot of difficulty selling all their stock and also an excess amount that has been bought.
Asset turnover has become better over the years, with approximately 14% increase, meaning that Racing Fashions is improving the use of assets and revenues.
Since the company is repaying creditors faster, it will effect their revenue, because they have less money to support the business, although it’s good to pay back creditors, the company still needs to maintain a considerable amount of money to keep a good balance between their assets and liabilities.
The company has become quite negative in terms of favourability, generally its efficiency is quite unfavourable for 2012
Some slight positives ...
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