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The Role of Accounting in Business

   

Added on  2020-10-22

8 Pages1865 Words426 Views
ACCOUNTINGFORBUSINESS

Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................1a. Explaining and computing the financial ratios .......................................................................1b. Interpreting the short term solvency and they efficiency of business in accordance with theresulted ratio. ..............................................................................................................................2PART-B...........................................................................................................................................3a. Items that represented as income.............................................................................................3b. Item that represented as revenue.............................................................................................4PART-C...........................................................................................................................................4a. Suggestion as banker ..............................................................................................................4b. Suggestion as a business person .............................................................................................5c. Suggestion in case the liabilities are paid off by existing owners...........................................5CONCLUSION................................................................................................................................5REFERENCES................................................................................................................................6

INTRODUCTIONAccounting means recording the business transactions so that financial performance and thefinancial position of the business can be evaluated. The results help the users in making thesuitable decisions.PART Aa. Explaining and computing the financial ratios Current ratio- It is a type of the liquidity ratio that assess the ability of the company inpaying off current obligations or the dues that are to be paid within a year. Quick ratio- This ratio relates indicates the liquidity position of the company and helps inmeasuring the capability of an entity in meeting its short term liabilities in respect of the assetsthat are most liquid (Le and Viviani, 2018). Accounts Receivable turnover- It is the number of days and the times for which theenterprise collects its receivables.Inventory Turnover ratio- This ratio is also called as the efficiency ratio that depicts theextent of effectiveness for managing the inventory by comparing the COGS to that of averageinventory (Christensen, Nikolaev and Wittenberg‐Moerman, 2016). It measures the number oftimes and the days in which the inventory is been turned during a particular period. Ratio analysis of Big Bang Pvt. Ltd.ParticularsFormulaAmount20182019Current assets222000218000Current liabilities81000105000current ratiocurrent assets/currentliabilities2.742.08Current assets222000218000Inventory150000130000Quick assetsCurrent assets-Inventory7200088000Current liabilities81000105000Quick ratio Quick assets/current liabilities0.890.84Net credit sales490000630000Average Account 108000950001

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