Accounting 2 Exam Case Study Help
Along with this, the ratio analysis is helpful in forecasting purposes. The trend could be established throughcalculating the ratios for the number of years. Such trend is useful in forecasting as well as setting up the future plan. For instance; the expenses as a percentage of the revenue or sales could be forecasted based on the expenses and sales of the prior year. The horizontal analysis of the company helps in analyzing the trends of the financial of thecompany over the period of time. Each line item can be used to determine the percentagechange as compared to the previous time period.The horizontal analysis helps in depicting whether the amount of change shows a positive difference in current year as compared to the previous year. On the other hand, the vertical analysis can be used to compare the various line items within a specific single time period.So, the ratio analysis helps in analyzing whether a financial state of the company us becoming less or healthier over the period of time.
- The Performance of the company is good because the company is earning around 7.5 percent (3,000 / 40,000) return on its total 40,000 sterling pounds investment which is not bad. In addition to this, the current ratio is around 4 (45,100 / 11,600) which is representing the very good cash position of the company.
- The importance of the financial accounting standards to the quality and value of the company financial statements is related to the equal standard financial report. This means that the accounting standard helps the companies to make their reports in a similar way as their competitors and other companies are making which helps the companies to attract the investors. If the accounting standards followed, an investor before making an investment, can compare the company’s financial position with its competitors and other companies in order to identify that where the company is standing and performing far or near to industry average.
- By analyzing the company’s cash position, the advice has been given to the company is to invest its extra cash in some money market securities which helps to get the handsome return on this short-term investment and will increase the company’s overall profitability. The company’s cash position is very healthy and they can invest their cash generated by operations in some other small business or money market securities or some treasury bonds.
- Budget helps to evaluate the managers performance in the company as well as the overall company’s performance. That is why, the managers use the budgets in order to increase their overall performance to get promotions and bonuses. In addition to this, the budget helps the mangers in controlling the revenues and expenses under his or her supervision in order to perform as the company has been predicted and expected about the future. There are many benefits for making budgets such as most off thee organizations makes master budget to run the company. Master budget includes the two areas which are operational and financial while each of which has its own sub-budgets such as the operational budget in the financial budget. The operating budget spans several areas that help plan and manage day-to-day business. In addition to this, the financial budget represents the expectations for cash inflows and outflows which includes the cash payments for predetermined operations, the purchase or sale of fixed assets, the payment and funding of loans, and changes in equity.........................................
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