Flashcards
ACCOUNTING DEFINITIONS
Cards in this deck (21)
- 1DEFINE NET PROFIT RATIOINDICATES THE ABILITY OF AN ENTITY TO GENERATE A NET PROFIT FROM THE SALES OF GOODS AND SERVICES (%)
- 2WHAT ARE THE NET PROFIT IMPLICATIONS?HIGH RATIO= OPERATING REVENUE IS HIGH AND EXPENSES ARE LOW
LOW RATIO= SELLING MARGIN IS LOW + EXPENSES ARE TOO HIGH - 3SOLUTIONS TO NET PROFITINCREASE SALES REVENUE + REDUCE EXPENSES
- 4DEFINE QUICK RATOMEASURES THE ABILITY OF AN ENTITY TO MEET IMMEDIATE FINANCIAL OBLIGATIONS
- 5WHAT ARE THE QUICK IMPLICATIONS?HIGH= HIGH DEGREE OF ASSURANCE THAT CURRENT LIABILITIES CAN BE MET
LOW= ENTITY IS DEPENDING ON THE INVENTORY TURNOVER TO PAY SHORT TERM OBLIGATIONS - 6SOLUTIONS TO QUICK RATIOINCREASE CURRENT ASSETS = INCREASE SALES
MONITOR EXPENSES
DECREASE CURRENT LIABILITIES - 7DEFINE TURNOVER OF INVENTORIESDEMONSTRATES HOW EFFICIENTLY THE INVENTORY OF THE BUSINESS IS MANAGED
- 8WHAT ARE THE TURNOVER INVENTORY IMPLICATIONS?HIGH= INVENTORY IS MOVING FAST +POSSIBLE SHORTAGE
LOW = SLOW MOVING INVENTORY+ LARGE INVENTORY HOLDING - 9SOLUTIONS TO TURNOVER OF INVENTORIES- REMOVE LARGE HOLDING OF INVENTORY -SELL THROUGH A RANGE OF MEDIUMS (PHONE SALE/ ADS)
- CHANGE PRICE POLICY
- QUIT BAD ITEMS - 10DEBT RATIOINDICATES THE WAY IN WHICH A BUSINESS IS FINANCED AND THE EXTENT OF THE FIRMS BORROWINGS IN RELATION TO ITS ASSETS.
- 11WHAT ARE THE DEBT IMPLICATIONS?HIGH= ASSETS ARE FUNDED THROUGH BORROWINGS
LOW = ASSETS ARE FUNDED THROUGH OWNERS - 12HOW TO IMPROVE DEBT- DECREASE DEBT THROUGH REPAYMENT
- MINIMIZE THE NEED TO HOLD LARGE ASSETS - 13EXPENSES TO SALES RATIODEMONSTRATES THE AMOUNT OF SALES REVENUE IS NEEDED TO COVER EXPENSES OF THE BUSINESS
- 14WHAT ARE THE EXPENSES IMPLICATIONS?HIGH = WEAK CONTROL OF EXPENSES IN COMPARISON TO SALES
LOW= TIGHT CONTROL OVER EXPENSES IN PROPORTION TO SALES - 15SOLUTION FOR EXPENSES- INCREASE NET PROFIT THROUGH SALES
- DECREASE EXPENSES WHILST INCREASING SALES - 16DEFINE CURRENT RATIOMEASURES THE ENTITY'S ABILITY TO MEET SHORT TERM FINANCIAL OBLIGATIONS IN THE CURRENT FINANCIAL YEAR
- 17WHAT ARE THE IMPLICATIONS OF CURRENT RATIO?HIGH= ABLE TO MEET SHORT TERM OBLIGATIONS
LOW= LOW DEGREE OF ASSURANCE THAT LIABILITIES CAN BE MET - 18SOLUTION FOR CURRENT RATIOINCREASE CURRENT ASSETS (SALES)
MONITOR EXPENSES
DECREASE CURRENT LIABILITIES - 19DEFINE CASH FLOW ADEQUACY RATIOMEASURES THE FIRMS ABILITY TO GENERATE CASH IN ORDER TO COVER IMMEDIATE OBLIGATIONS
- 20WHAT ARE THE IMPLICATIONS OF CASH FLOW ADEQUACY?HIGH = EXCESS CASH IS AVAILABLE TO MEET OBLIGATIONS
LOW= LITTLE CASH AVAILABLE TO MEET OBLIGATIONS - 21SOLUTIONS FOR CASH FLOW ADEQUACY- INCREASE CASH FROM OPERATIONS
-MONITOR APPARENT INCREASES IN CASH FOR ASSETS, DRAWINGS, LONG TERM PAYMENTS
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- High school year 12 Accounting Flashcards on ACCOUNTING DEFINITIONS , created by Ciera Stafford on 09/06/2016.
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- Ciera Stafford
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