ASSIGNMENT JULY DECEMBER 2016

MS-04 (SAMPLE COPY)

Course Code
Course Title
Assignment Code
Assignment Coverage

MS - 04
Accounting and Finance for Managers
MS-04/TMA/SEM - II/2016
All Blocks

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1. Take an organization of your choice & find out how the Accounting Reports are prepared by them
and how these reports are useful for managers while making decisions relating to the activities of a
Business.
Accounting has been defined as "---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and other obligations to sales revenue and owners' equity. An
understanding of the financial data contained in accounting documents, then, is regarded as essential to reaching an accurate
picture of a business's true financial well-being. Armed with such knowledge, businesses can make appropriate financial and
strategic decisions about their future; conversely, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- reflected in the words of the American Institute of Certified Public Accountants
(AICPA), which defined accounting as a "service activity."

The organization I am referring here is MSA Safety Company. Which deals in providing safety products. I am
here going to discuss followed by MSA Safety company for preparing Accounting reports.
Objective of an Accounts Preparation Engagement

The objective of -------------------------------------------------------------------------------------- expertise (as opposed to

auditing expertise) to collect, classify and summarise financial information.

This ordinarily entails reducing -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. However, users of the compiled financial information derive some
benefit as a result of the chartered accountants' involvement because the service has been performed with professional
competence and due care.

General Principles of an Accounts Preparation Engagement

1. The chartered ------------------------------------------------------------------------------ Code of Ethics.
2. Ethical principles governing ----------------------------------------------- of engagement are:
(a) Integrity- A professional accountant --------------------------------------------------------------------------- relationships.
(b) Objectivity- A professional --------------------------------------------------------------------------------------------------- to override
professional or business judgements.
(c) Professional Competence and Due Care- A -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------n and techniques. A professional accountant should act diligently and in
accordance with applicable technical and professional standards when providing professional services.
(d) Confidentiality- A professional ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- a legal or professional right or duty to disclose. Confidential information acquired as a result
of professional and business relationships should not be used for the personal advantage of the professional accountant or third
parties.
(e) Professional Behaviour- A ------------------------------------------------------------------------------------------------- and should
avoid any action that discredits the profession.
3. Independence in the strict sense ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- (Scotland) Regulations 2006, they must be independent of the charity. In such circumstances,
the chartered accountants must satisfy the independence requirements of sections 280 and 290 of the ICAS Code of Ethics.
4. There are certain factors which threaten objectivity in any professional role. These are:
(a) Family, other ----------------------------------------------------------------------, owners or employees;
(b) Loans or guarantees ---------------------------------------------------------------------------------- (including outstanding fees);
(c) Beneficial ------------------------------------------------------------------------- of the client entity;

(d) Acceptance ------------------------------------------------------------------------------------------- entity; and

(e) Any other conflict ---------------------------------------------------------------------------------------------- of Ethics.
5. It should be noted that if, in addition, the chartered accountants are requested to provide any kind of opinion, reference should
be made to section ------------------------------------------------------------------------------- the Terms of Engagement
6. The chartered accountants should ensure that there is a clear understanding between the client and themselves regarding the
terms of the engagement.
7. It is recommended that the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------be issued. Suggested paragraphs to be included in an engagement letter for a non-charitable audit
exempt company are contained in Appendix 1: these can be easily adapted for other types of entity. Planning
8. The chartered accountants should plan the work so that an effective engagement will be performed.
9. The extent of planning varies ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------work
will be delegated to assistants. Documentation
10. The chartered accountants should document ------------------------------------------------------------------------------------- was
carried out in accordance with professional expectations and the terms of the engagement. Procedures
11. The chartered accountants ------------------------------------------------------------------------------------------------------- be familiar
with the accounting principles and practices of the industry in which the entity operates and with the form and content of the
accounts that is appropriate in the circumstances.
12. To prepare accounts, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of these matters through experience with the entity or inquiry of the entity's personnel.
13. The chartered accountants -------------------------------------------------------------------------------------------------- into the
accounts being prepared. Any unreasonable estimates or unusual judgements would normally be questioned.
14. If the chartered accountants become -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------from the engagement, informing the client of the reasons for the withdrawal.
15. The chartered accountants -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------cut off procedures to ensure that items were being recorded in the correct period.
16. The chartered accountants should review the ------------------------------------------------------------------------------ in form and
free from obvious material misstatements. In this sense, misstatements may include:

misclassifications of items in the accounts;

mistakes in the application ------------------------------------------------------------------- requirements;
non-disclosure of ------------------------------------------------------------------------------------ requirements;
non---------------------------------------------------------------------------------------------- have become aware.

17. This would normally -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------no errors had been made in the accounts preparation.
18. The chartered accountants would normally -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------type of entity concerned.

19. The verification work suggested in paragraphs 20 to 28 falls well short of an audit and does not include any detailed
procedures to verify the validity or completeness of the books and records generally. Indirectly, however, these procedures
would give the chartered accountant some comfort that the accounts properly reflect the business of the entity and are free from
material error.
20. If the chartered accountants become -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the engagement.
21. Where there are departures from -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, if the departures are such that they render the accounts misleading then the chartered
accountants should withdraw from the engagement.
Notification of withdrawal from engagement
22. The chartered accountants would normally explain to management their reasons for withdrawing from the engagement unless
this would constitute a breach of legal or other regulatory requirement (such as the tipping off provisions of the money
laundering legislation). Content of Accounts Companies Incorporated Under The Companies Act 2006
23. The Companies Act 2006 -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Under Other Legislation
24. Accounts prepared for entities ----------------------------------------------------------------------------- requirements, all applicable
financial reporting standards/FRSSE and supporting pronouncements including, where relevant, a SORP.
Unincorporated Entities
25. Unless there are specific reasons for not -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------pronouncements, including where relevant, a SORP.
26. Section 25 of the Income -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of Management
27. The chartered accountants may wish to obtain an acknowledgement from management in a letter of representation of its
responsibility for the financial information supplied.
28. In the case of a company, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- view and have been prepared in accordance with the Companies Act 2006 In particular
the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent; and
prepare accounts on a going concern basis unless it is inappropriate to presume that the company will continue in
business.
The directors are also responsible for safeguarding the assets of the company and for taking steps for the prevention and
detection of fraud and other irregularities.
29. The engagement to prepare -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in this respect.
Management Approval of Accounts

30. The chartered -------------------------------------------------------------------------------------------, normally evidenced by a

signature on the balance sheet, prior to signing their report on the accounts.
31. For companies taking advantage of the audit exemption provisions of the Companies Act 2006, a statement to this effect is
required on the balance sheet.
Reporting on an Accounts Preparation Engagement
32. The chartered ------------------------------------ prepared, to make clear to users the extent of their involvement with those
accounts.
33. The report would normally include the following:
(i) A title identifying --------------------------------------------------- this would be the Directors).
(ii) A statement that, the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------numbers.
(iii) A statement that the chartered accountants are subject to the ethical and professional requirements of the Institute which can
be ---------------------------------------------------------------------------.
(iv) A statement that the report is ------------------------------------------------------------------------------ of the engagement.
(v) A statement that, to the ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------as a body
(vi) For companies, a statement -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------be applicable for other types of entity.
(vii) A statement that the chartered accountants have not carried out an audit of the accounts, verified the accuracy or
completeness of the accounting records or information and explanations supplied, and that the chartered accountants do not
express any opinion on the accounts.
(viii) The name, signature and address of the chartered accountants and any appropriate designation (but not Registered
Auditor).
(ix) The date of the -------------------------------------------------------------------------------- are included in the report issued to
management, this is ultimately a risk management decision for each member firm.

Importance of AccountingAccountancy plays a vital role in -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------attention to the management reporting and interpretation of the meaningful implication of the
data.
The importance of accounting concepts -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. In order to demonstrate the role of accounting concepts and convention producing a viable
financial report of any going concern, the following objectives are set out in this study:

To determine ------------------------------------------------------ the preparation of financial statement.

To ascertain if accounting concepts and conventions assist the provision of useful information for making economic
decision.
To determine whether ----------------------------------------------------------------- how transactions are accounted for.
To determine whether accounting concepts and conventions make financial reports more meaningful and reliable.

These examines how accounting ----------------------------------------------------------------- which are used in decision making and
for evaluation of financial strength, profitability, and future protection of the organization.
However, it was not possible to cover all organization that use accounting concepts and convention in Nigeria. This is because
much energy is required, it is expensive as well as time consuming.

The Nigeria Breweries PLC having been selected, the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------corporate goals.
As stated earlier, an understanding of the basic -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of accounting information. These are the benefits the various users of financial
statements gets;
o
o
o
o

It provides the framework for constructing financial report.

It provides useful information for making economic decision.
Is useful for analysis of the Organizational financial statements.
Is useful in making financial reporting and useful tool for decision making.

Furthermore, this study provides a better understanding of the desire for objectivity which is often at the desire for objectivity
of the financial accounting method in use at the present time.
This information enables managers -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of which involve strategic decisions which affect the long-term health of their own
organizations
Role of accounting concepts in the preparation of financial statements
Financial accountants produce -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the International Financial Reporting
Standards.
Financial accounting serves the following purposes:

producing general purpose financial statements

producing --------------------------------------------, planning and performance evaluation
Producing financial statements for meeting regulatory requirements.

Accountancy plays a vital role in the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------total attention to the management reporting and interpretation of the meaningful implication
of the data.

2. Prepare the Cash Flow Statement for XYZ Ltd. for the year 2015-16 and analyze its cash flow
position.

`
The following additional information has been provided regarding the firm:
(i) Current liabilities denote amount that is payable to suppliers.
(ii) Raw materials constitute 80% of the inventory balance of the firm.
(iii)Loans and advance include income tax paid Rs. 240 lakh (previous year Rs. 150 lakh)
(iv) During 2015-16 10 lakh of equity shares of Rs. 10 each were issued at par. Long-term loans raised
during the year amounted to Rs. 160 lakh.
(v) The interest shown in the P&L account has actually been paid for in cash and other income is realized
in cash.

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3. With the help of a suitable illustration, explain how the costs and volume influence profit of a business.
A few different ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------potential. This relationship is
sometimes express as the cost volume profit, or CVP relationship.

Cost-Volume-Profit [CVP] ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------part of the profit planning process of the firm.

However, formal profit planning and control involves the use of budgets and other forecasts, and the CVP analysis provides only
an overview of the profit planning process. Besides it helps to evaluate the purpose and reasonableness of such budgets and
forecasts.
Pricing
When a business prices a ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------product. Additionally, when considering the cost element of
the pricing model, the business should always evaluate overhead costs. Overhead costs are a type of fixed cost and include costs
such as rent of the warehouse space, the price of utilities and interest payments on loans.

Profit equations have two basic factors ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------revenue.

Cutting

costs

may

include

negotiating for lower material costs, reducing inefficiencies in business operations or labor cuts. As long as these cost cuts do not
create a profound drop in revenue performance, profits will improve.

The cost structure of a firm describes the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to profit more from
increasing sales, and lose more from decreasing sales than a similar firm with low operating leverage.

Companies with high operating leverage ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------tend to be much less sensitive to changes in sales than their high operating leverage counterparts.

Sales Volume
The demand for a product will greatly ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the sale. Under a basic pricing strategy, if the sales volume of a product is too low, the business will generally
lower the price point to increase sales. This will, however, also result in a reduced profit on the item for the business. In many --------------------------------------------------------------------- in a higher sales volume.

Sales volume means the amount of --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------your gross profits and your net income. If
you can lower your costs without impacting revenue and maintain the same sales volume, your profits will go up.

Profits
When looking at the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------profit,

the

business

will

generally adversely affect the demand for the product. On the other hand, lowering the price point of an item will generally
lower the profit for the item but will increase the demand for the product.

Gross profit is a common financial ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------remaining

income

when fixed costs are subtracted from gross profit. These are costs you incur regardless of how many items you produce or sell.
Common fixed costs include insurance, interest, rent and labor costs not directly died to production.

CVP-Model and Costs

The CVP-model is a -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- the costs incurred. For example, if a business wants to buy
new equipment to increase production ---------------------------------------------------------------------------- CVP analysis to calculate
the reduction in variable costs necessary to maintain the same overall cost for a product.

Companies use various strategies to -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------added value solutions may focus more
on creating a strong sense of value for the product itself in order to get higher sales prices and greater margins, thus reducing the
need for as much volume.

Companies with a relatively high proportion of fixed costs have high operating leverage. For example, companies that produce
computer processors, such as NEC and Intel, tend to make large investments in production facilities and equipment and

therefore have a cost structure with high fixed costs. Businesses that rely on direct labor and direct materials, such as auto repair
shops, tend to have higher variable costs than fixed costs.

Operating leverage is an important concept ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------has relatively high fixed costs, and Low Operating Leverage Company (LOLC) has relatively low fixed
costs.

A little bit of simple maths can help us answer numerous different cost-volume-profit questions.
We know that total revenues are --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of total revenue over total costs will give rise to profit (P). By putting this information into a
simple equation, we come up with a method ------------------------------------------------------------------------------------------------------------------------ continuing with the example of Company A above.

Total revenue total variable costs total fixed costs = Profit

(USP x Q) (UVC x Q) FC = P (50Q) (30Q) 200,000 = P

Note: total fixed costs are used rather than unit fixed costs since unit fixed costs will vary depending on the level of output.

It would, therefore, be --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------all levels of output in the short-run, and, therefore, unit costs are appropriate.

4. A Company is considering to replace an existing machine for which two suppliers have given
quotation. Supplier A has proposed a machine costing Rs. 180 lakh that uses the existing boiler while
supplier B has quoted for the machine Rs. 110 lakh but that requires modification in the existing energy
supply system costing Rs. 30 lakh. The machines have a life of 10 years and can be sold for 5% and 10%
of the original cost respectively for Suppliers A and B. The additional working capital requirement

expressed as % of revenue are 20% and 25% respectively because of larger requirement of fuel for the
machine from

The firm charges depreciation on SLM basis with zero book value and has a tax rate of 35% for all
kinds of income. The cost of capital for the firm is 12%
Which of the suppliers should the company prefer?
(a) as per NPV rule
(b) as per IRR rule.

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5. How would you judge the efficiency of the management of working capital in a business
enterprise? Explain with the help of hypothetical data.
There are no set rules or --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------should be made in order to determine total investment in working capital.

The firm should maintain a sound working ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capital not only impairs firms profitability but also results in production interruptions
and inefficiencies.
An enlightened management should, therefore, maintain a right amount of working capital on a continuous basis. Only then a
proper functioning of the business operations will be ensured. Sound financial and statistical techniques, supported by judgment
should be used to predict the quantum of working capital needed at different time periods.
A firms net working capital position is ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. Lenders such as commercial banks insist that the firm should maintain a minimum net
working capital.
There is an unavoidable need to manage working capital well. Working capital management refers to the administration of all
aspects of current assets, namely cash, marketable securities, debtors and inventories and current liabilities. The financial
manager must determine levels and composition of current assets. He must see that right sources are tapped to finance current
assets, and that current liabilities are paid in time.
The current assets holdings of the firm ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capital management should be within these policy frameworks.

The two important aims of the working ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------assets holdings. If the firm maintains a relatively large investment in current assets, it
will have no difficulty in paying claims of creditors when they become due and will be able to fill all sales orders and ensure
smooth production. Thus a liquid firm has less risk of ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ position. A considerable amount of the
firms funds will be tied up in current assets, and to the extent this investment is idle, the firms profitability will suffer.
To have higher profitability, the firm may sacrifice solvency and maintain a relatively low level of current assets. When the firm
does so, its profitability will improve as less funds are tied up in idle current assets, but its solvency would be threatened and
would be exposed to greater risk of cash shortage and stock-outs.
To judge the efficiency of the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------very high, it has excessive liquidity. It returns of assets will be low, as funds tied up in idle cash
and stocks earn nothing and high levels of debtors reduce profitability. Thus, the cost of liquidity (through low rates of return)
increases with the level of current assets.
For example, following are the hypothetical data for three firms following different working capital policies and their outcome:

In determining the optimum level of current ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the firm should maintain its current assets at that level where the sum of these two
costs is minimized.
Working capital refers to a --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- extent, depends on its
efficiency in managing working capital. Some of the parameters for judging the efficiency in managing working capital are:

Whether there is --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- liquidity to meet maturing liabilities.

Whether maximum possible --------------------------------------------------------------------------------------------------------------------------------------------------------------. Both depend upon a company's strength as a seller and as a buyer.

Whether adequate credit is ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------supplier imposes the credit terms as 100% advance, i.e., negative
trade credit.

Whether there are adequate safeguards to ensure that neither overtrading nor undertrading takes place.

The following indices can be used for measuring the efficiency in managing working capital:
Current Ratio (CR)
CR = Current Assets/Current Liabilities
It indicates the ----------------------------------------------------------------------- the trend of working capital over a period of time.
Quick Ratio (QR)
QR = Liquid Assets/Current Liabilities
Where liquid assets include Cash in hand, --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- stock and prepaid expenses.
Current liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc.
Cash to Current Assets: If cash --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- profit, the proportion should usually be kept low.
Sales to Cash Ratio
Sales to Cash Ratio = Sales/Average cash balance during the period.
Cash should be -------------------------------------------------------------------------------------------- minimum cash on hand.
Average Collection Period
(Debtors/Credit Sales) x 365
This ratio ---------------------------------------------------------------------------------------- settle their bills.
Average Payment Period
Average payment period = (Creditors/Credit purchases) x 365
It indicates how ------------------------------------------------------------------------ from its suppliers.

Inventory Turnover Ratio (ITR)

ITR = Sales/Average Inventory
It shows how ---------------------------------------------------------------------------------- at a level which balances production facilities
and sales needs.
Working Capital to Sales: It --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- adequate. Therefore, this ratio helps
management in maintaining working capital, which is adequate for the planned growth in sales.
Working Capital to Net Worth
Working Capital/Net worth
This ratio shows the -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- management should, therefore, avoid both overtrading and under trading.

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