Ask Financial Accounting Expert

You may just be wondering as to see that how we control activities by ratios. The answer is not tough to seek. Ratios we have known for control of activities measures relationships among key elements at any point of time. That a measure is then compared along with some 'norm' and the causes for deviation investigated. An action plan is after that prepared and implemented to eliminate the causes. For illustration, Nagpur Textile Mills Ltd. reports 89 days of inventories conduct on an average against net sales throughout the year 2002. Here, how do we judge if the diagram of '89 days' is only regarding okay for a firm such as "Nagpur Textile Mills Ltd."? The subsequent appear to be the ways for estimating this figure:

a) Against a trend over time: The subsequent data might be observed for Nagpur Textile Mill:

Year                                         Average Number of days of inventory:

 1998                                                    90

1999                                                    118

2000                                                    115

2001                                                    107

2002                                                    98

Average number of days = Net sales /((opening inventory + closing inventory)/(2/365))

b) Against an average of some past period: The relevant data for Nagpur Textile Mill may be estimated on the origin of the mean of average number of days that are: (90 +118 + 115 + 107 + 89)/5 = 519/5 = 104 days approximately.

c) Against an industry average: A specific number of firms selected randomly or otherwise from textile industry, to that Nagpur Textile Mill Ltd. belongs, may be utilized to estimate the industry average such as a norm. Hence, data relating to average number of days of inventory of, as like 20 textile units of the size and kinds of Nagpur Textile Mills Ltd. might be averaged for an exact year for that Nagpur Textile's ratio is being estimated. Period averages for firms may also be utilized to acquire a grand mean for evaluation.

d) Against an average of a cross-section sample: The Reserve Bank of India publishes financial statistics of joint companies.

Their sample for the period from 1998 or 1999 to 2000 or 2001 as well as 1927 public limited companies along with paid up capital of Rs 100 crores and above. Year-wise averages for corporate sector as an entire are available. In a same manner, the ICICI publishes elaborate data on financial performance of companies assisted through them. The newest study pertains to the year 1984 - 1985 and contained 417 companies in various industry groups. Such sample covers around 50 percent of the whole private corporate sector in terms of paid-up capital. Year-wise average for industry groupings is obtainable.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M9618723

Have any Question?


Related Questions in Financial Accounting

Case study - the athletes storerequiredonce you have read

Case Study - The Athletes Store Required: Once you have read through the assignment complete the following tasks in order and produce the following reports Part 1 i. Enter the business information including name, address ...

Scenario assume that a manufacturing company usually pays a

Scenario: Assume that a manufacturing company usually pays a waste company (by the pound to haul away manufacturing waste. Recently, a landfill gas company offered to buy a small portion of the waste for cash, saving the ...

Lease classification considering firm guidance issues

Lease Classification, Considering Firm Guidance (Issues Memo) Facts: Tech Startup Inc. ("Lessee") is entering into a contract with Developer Inc. ("Landlord") to rent Landlord's newly constructed office building located ...

A review of the ledger of oriole company at december 31

A review of the ledger of Oriole Company at December 31, 2017, produces these data pertaining to the preparation of annual adjusting entries. 1. Prepaid Insurance $19,404. The company has separate insurance policies on i ...

Chelsea is expected to pay an annual dividend of 126 a

Chelsea is expected to pay an annual dividend of $1.26 a share next year. The market price of the stock is $24.09 and the growth 2.6 percent. What is the cost of equity?

Sweet treats common stock is currently priced at 3672 a

Sweet treats common stock is currently priced at $36.72 a share. The company just paid $2.18 per share as its annual dividend. The dividends have been increasing by 2,2 percent annually and are expected to continue doing ...

Highway express has paid annual dividends of 132 133 138

Highway Express has paid annual dividends of $1.32, $1.33, $1.38, $1.40, and $1.42 over the past five years, respectively. What is the average divided growth rate?

An investment offers 6800 per year with the first payment

An investment offers $6,800 per year, with the first payment occurring one year from now. The required return is 7 percent. a. What would the value be today if the payments occurred for 20 years?  b. What would the value ...

Oil services corp reports the following eps data in its

Oil Services Corp. reports the following EPS data in its 2017 annual report (in million except per share data). Net income $1,827 Earnings per share: Basic $1.56 Diluted $1.54 Weighted average shares outstanding: Basic 1 ...

At the start of 2013 shasta corporation has 15000

At the start of 2013, Shasta Corporation has 15,000 outstanding shares of preferred stock, each with a $60 par value and a cumulative 7% annual dividend. The company also has 28,000 shares of common stock outstanding wit ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As