HND大二会计outcome3

1、1. Overall, the cash has decreased by367000, This is a worsening of the cash flow position. The company made a Net cash flow from operating activities of1345000. This is the only one inflow of this company. There was also an outflow of 984000 paid for acquire fixed assets. This is the biggest outflo

2、w of this company. This was a significant outflow and is the main factor contributing to the overall decrease in cash. The next outflow on the cash flow statement was 260000 paid for Equity Dividends paid. This is a reasonable amount given the large cash flow from trading activities. There was also

3、an outflow of 234000 for tax. This is an unavoidable outflow as it is based on profit. The company spend 234000 for interest paid. Interest payments could be reduced in future by issuing ordinary shares instead of debentures. Alternatively, the company could seek to get a lower interest rate. The ma

4、in factor causing the decrease in cash was the increase in stock, increase in debtors and decrease in creditors. So we should review purchasing policies and avoid overstocking, issue shares instead of debentures to avoid interest.2. Profitability Ratios:Users of financial statements will be interest

5、ed in the profit made by a company and then compare it with previous years or with competitors. The absolute profit figure is of little use when analyzing the performance of a company. The gross profit percentage in 2003 is 59.96%, in 2004 is 60.06%. An increase in the gross profit percentage is a g

6、ood sign. The positive trend can be an indication that stock control has improved, purchasing policies have improved or demand for the product has increased. Possible reasons for the increase in the profitability of this companys trading may include improved marketing strategy, better pricing policy

7、, cheaper suppliers or improved stock control. The net profit percentage in 2003 is 10.13%, in 2004 is 6.73%. A decrease in the net profit percentage is a bad sign as it indicates the company is less profitable, perhaps because a decline in sales, an increase in costs of sales or an increase in expe

8、nses.Liquidity RatiosSometimes known as solvency ratios, liquidity ratios show the ability of the company to repay any loans. Creditors and lenders will use this category of ratios as an indication of a companys credit rating. The current ratio in 2003 is 1.56:1, in 2004 is 1.78:1. Generally speakin

9、g a healthy current ratio is at least 2:1. Where the ratio is less than 2:1 this indicates the company may be over trading and have difficulty in meeting its short-term debts. But contrast 2003 with 2004 the ratio also increase, the reasons for the increase are the current assets are increase and th

10、e current liabilities are decrease. The acid test ratio in 2003 is 0.77:1, in2004 is 0.64:1.Generally speaking a healthy asset test ratio is at least 1:1. Again, a lower acid test ratio indicates liquidity problem for the company whereas ratio of greater than 1:1indicates that cash is lying idle. An

11、 optimum acid test ratio is 1:1. This ratio has declined between 2003 and 2004. And at 2003 this ratio lowers an acceptable level. Affecting this conditions reason is: A decrease in liquid assets or an increase in current liabilities.Efficiency RatiosThe fixed asset turnover in 2003 is 2.91 times, i

12、n 2004 is 3.1 times. Where this ratio has decreased, this is not a good sign. If this ratio is moving downwards it indicates that either the existing fixed assets are decline in sales leading to fixed assets lying idle or technical or mechanical problems with new or existing fixed assets.The stock t

13、urnover in 2003 is 7.69 times, in 2004 is 6.71 times. Generally speaking a higher rate of stock turnover is a healthy sign as it indicates that the company is buying more stock, most probably as a result of selling more. This reduction in stock turnover in 2004 indicates that stock is not being reor

14、dered as frequently as in the previous year. This may be negative sign indicating that stock is not selling as quickly, a poor stock mix, overstocking, inefficient purchasing policy, and increase in bulk-buying to take advantage of discounts.Capital StructureThe interest cover in 2003 is 6.05 times,

15、 in 2004 is 4.85 times. A higher figure is a good sign as is shows the company is more able to meet its interest payments, Ideality; interest cover should be no less than 3 times. In this company the indicator compare 2003 with 2004 it increase. This increase is not a very healthy sign, factors nega

16、tively affecting this ratio is: a decrease in net profit, an increase in debentures, an increase in interest rate.The debt ratio in 2003 is 44.65%, in 2004 is 40.62%. Generally speaking, a debt ratio of 50% or less is desirable. A higher percentage implies the company has too much debt and may encou

17、nter difficulties if interest rates were to increase. Compare 2003 with 2004, we can find the debt is decrease. The factors negatively affecting this company ratio is: a decrease in current liabilities, a increase in assets.3. This company wishes to expand. So this company should collect money. It h

18、as some ways for this company to collect money. First, I will show the short-term. Bank account holders can prearrange with the bank to draw cheques to a greater value than the actual balance in the account. Customers are charged interest on the size of the overdraft. Bank charges will also apply wh

19、ere an overdraft limit has been exceeded. Bank overdrafts are a fairly cheap form of finance with the added advantage of flexibility. In some cases a small overdraft facility may be offered free of charge. Second, I will show the medium-term. Syndicate Loan is where a larger sum of money is involved

20、 or if the customer carries a risk, a group of banks will contribute towards a single loan. Third, I will show the long-term. These are loans made to companies that carry a fixed rate of interest. The companys fixed assets normally secure debentures. Debentures may have a fixed time period or open time period. Debenture holders are not shareholdersthey do not participate in the running of the company. This type of finance is therefore referred to as external.But it exist problems, get through analysis the cash