Accounting For Managers Suppourt

Questions: (a) How much are Casino Computer Service Centers total asset? (b) How much are Casino Computer Service centers total Liabilities? (c) Can the company pays its debts and remain in business? (d) Calculate the amount of profit or loss for Casino Computer Service Center. (e) Calculate Casino Computer Service Centres equity and accounting equation. (f) An asset is similar to an expense. Do you agree? Discuss and use examples to support your discussion. (g) Calculating the following ratios for the two companies. Return on Equity Ratio (in %) Gross Profit Ratio (in %) Net Profit Ratio (in %)Inventory Turnover period (No. of Days) Inventory Turnover period Debtors Settlement period (No. of Days) Capital gearing ratio (in %) Current Ratio (No. of times) Quick or (Acid Test) Ratio (No. of times) Answers: (a)The total assists of Casino Computer Service Centres are $60200 comprising of cash , Accounts receivable and Land (b)The total liabilities of Casino Computer Service Centres are $2700 comprising of Accounts payable. (c)Yes, the company can pay its debts and remain in business because it is generating service revenue, it has good amount of cash in hand and accrue accounts receivable. The company can easily pay off its debts and stay in business. (d)The amount of profit is Service revenue-Office supplies-Rent expense-Salary expense-Interest expense-Utilities expense-dividend ,therefore total profit is $15000-$500-$3500-$2600-$400-$500-$4500 =$7500 (e)Theaccounting equationis: Total side of the Debit side = Total liabilitie side including shareholder equity. The balance sheet is a multifaceted show of thisequation, viewing that the total debit side that is the asset side of a corporation are equal to the credit side of the balance sheet including shareholder funds. Therefore Cash + Accounts receivable Land = Accounts payable + Share Capital+ Retained earnings 25200+5000+30000=2700+40000+14500+3000 Note: The profit of $3000 is included as it will be transferred to the retained earnings of current financial year. (f) An asset cannot be classified as an expense . Asset are resources that are owned by the company, it can be anything an intangible asset or in tangible asset. Expenses are the expenditure that are incurred by the company in respect to the business operations. They cant be classified as resources and they doesnt add economic value to the company as asset provides. For example goodwill is an instable asset, land in this example is a fixed asset. Rent expense , utility expense can be said as an expense incurred by the company to generate revenue. (g)Equity return ratio is a effectivenessrelationshipthat trials the aptitude of a corporaton to make profits from its stockholders moneys in the business (The Economic Times, 2016). Return on equity can be classified as Average income ROE =Annual Net Income/Average Stockholders' Equity ACDC ltd: 170/1140 =.14 or 14% Beeges Ltd: 170/420 = .40 or 40% Thegrossmarginrelationis considered by dividing the business'sgross profitdollars by its remaining transactions or sales dollars. It is termed as an effectiveness ratio that shows the relationship among gross profit and total net sales income. It an effective basis to assess the operational presentation of the business . Gross profit: Gross profit / Net sales ACDC ltd: 680/2880 = .23 or 23% Beeges Ltd: 500/2800= .17 or 17% Net profit ratio is the ratio that is the profit after tariff or tax to net sales . All the cost of production, and all the administration costs , all expenditure that is necessary to generate revenue for the business like rent expense ,cost of materials, electricity expense and the income tax are recognised accordingly. It is not an indicator of proper cash flows as it includes many non-cash items like depreciation, the expenses which are accrued , amortisation expense,. It is actually a small term measurement and cannot be relied upon for long term purpose. A corporation may postponement a diversity ofoptional expenses, such as upkeep, to make its net profit ratio appear more proper than it is already existing (Ready ratio, 2012). Additional plan that can insincerely make the ratio lower is when a business's proprietors need to diminish taxes, and so hasten the acknowledgment of taxable revenue into the present time. Net profit ratio : Net profit / Sales ACDC ltd: = 170/ 2880 = .05 or 5% Beeges Ltd = 170/ 2800 = .06 or 6% In bookkeeping or accounting, theInventory revenueis a quantity of the amount of times stockis vended or castoff in a timeperiodsuch as a year or half a year.. This is actually an indication how good the company is handling inventory and generating more sales and earn more revenue. A high ratio will result in lost revenue as there is no stock to meet the demand. Inventory turnover ratio :The cost of the good that is sold /Average Stock ACDC ltd = 2200/640= 3 i.e. 1/3*365= 123 days Beeges Ltd = 2300/100= 23 i.e. 1/23* 365 = 16 days Debtors Payment period is the standard time it takes whichever for a corporate to pay its creditors or debtors for what they owe. It actually helps a company to know how much time the company will be able to bet its money. Average payment or settlement period for debtors = trade debtors x 365 days / credit sales ACDC ltd = 560*365/2880= 70 days BeeGees Ltd = 220*365/2800 = 27 days Assuming that the sales are not cash sales and are credit sales. Capital gearing ratiois a good method to keep a check at the the capital assembly of a corporation and is considered by dividing the shared shareholders equity by immovable interest or dividend bearing funds. Properly overviewing capital arrangement means calculating the association between the funds provided by shared stockholders and the reserves delivered by those who obtain a periodic interest or dividend at a rate that is fixed. It is actually a measure of the performance of the company and is helpful for the investors (Ashok, 2016) Capital gearing ratio : Stockholders equity : Fixed interest bearing funds ACDC ltd = 1140/1000= 1.14 BeeGees Ltd =420/200 = 2.1 Current ratio is the liquidity ratio which indicates about how frequently the company is able to meet its short term debts and long term obligations. It is also known as the working capital ratio. It indicate good health of the companys condition Current ratio : Current assists/ Current liabilities (Folger, 2016) ACDC ltd = 1380/300= 4.6 times BeeGees Ltd = 550/600 = .91 times Quick ratio Quick ratio is the ratio which indicates how healthy the corporation is able to meet its financial liabilities. Quick ratio excludes stock from the assists. The ratio originates its name seemingly from the resource such as assets such as cash and saleable securities are rapid sources of cash and it does not include inventories as inventories take time to convert in to cash. Whether accounts receivable is a source of ready cash is debatable, however, and depends on the credit terms that the company extends to its customers. Quick ratio = (Assests that are current stock) / current obligations, or = (cash +saleable securities+ any receivables) / current obligations ACDC ltd = 750/300= 2.5 times BeeGees Ltd = 450/600= .75 times To comment on the ratio we would go with the with the ROE ratio where the ACDC ltd has low ratio than BeeGees Ltd. It means BeeGees Ltd is able to make more profits from the shareholders. The gross profit ratio of ACDC ltd is higher than Beegees ltd is higher it means the company sales are high with low cost of production. Coming to quick ratio ACDC ltd is overpowering the other company as it has high ratio that mean liquidity rise as the ratio rises. Same goes with the current ratio as the ratio of ACDC Ltd is increasing the liquidity power is rising and it is beneficial for the investors also. Net profit ratio of BeeGees Ltd is more which means more profits for the company and it does not include any depreciation or other on cash item so it is generating actual profits. Coming to the debtors average settlement period where the ACDC ltd is taking more days to pay its money and the other company is taking less days, so it means Beegees ltd has a good control over paying its debtors. Capital gearing ratio is better when the ratio is lower ,in this case ACDC has a low ratio it means it is good for the investors to go with the ratio and invest. Capital gearing ratio is usually seen by the investors to invest in the company. In inventory collection period , the higher the ratio or days the bad it is therefore Beegee is overpowering ACDC ltd. At the end it is seen that ratios play an important role in letting the company, the stock holders, the investor , the third parties know about the financial results of the company and various measures are provided to keep things at place. It is an important tool for the company to ask loans and can raise by having proper ratios and can make proper analysis of the firm. They can easily chalk out a plan for the corporation. Proper cost cutting facilities are doe by this, the debtors creditor come to know about the collection period and the company tends to know about the profit ratio that they are generating and useful for compa ring results from previous year. References: Ready ratios. (2012).Net profit margin. Retrieved 11 December 2016 from https://www.readyratios.com/reference/profitability/net_profit_margin.html Folger, J . (2016).Formula for calculating current ratio. Retrieved 11 December 2016 from https://www.investopedia.com/ask/answers/070114/what-formula-calculating-current-ratio.asp Ashok, M . (2016).Capital gearing. Retrieved 11 December 2016 from https://www.accountingnotes.net/financial-management/capital-structure/capital-gearing-meaning-and-significance/7966 The Economic times . (2016).Return on equity. Retrieved 11 December 2016 from https://economictimes.indiatimes.com/definition/return-on-equity