Purpose of Final Accounts The financial statements of an organization made up at the end of an accounting period, usually the fiscal year (Anoymity, 2015). The three statements link together to show a lot of information about a business, but to make a comprehensive judgement there needs to be information about aims and policies. These are called final accounts because they are the last accounts, prepared at the end of the …show more content…
High GPR is benefit for development of this firm. For GTY, the GPR almost remain a relatively stable.
Net Profit Ratio (NPR): Operation profit before interest & tax/sales✕100%
2014: 1750/11500 ≈ 15.2%
2015: 2520/14000 ≈18%
NPR reveals the remaining profit after all costs of production, administration, and financing have been deducted from sales, and income taxes recognized. (Anoymity, 2015) High result means high efficiency of company. We can see clearly that GTY reduce cost in 2015. So, the NPR is increase.
Inventory Turnover (T/O): Cost of sales/Inventory
2014: 2850/69 ≈ 41.3 times
2015: 3500/84 ≈ 41.6 times
T/O is a method to show times which productions are sold and produced during a year. For different business, the time is very different. However, GTY is a supermarket. It is good situation that company with high inventory turnover.
Average Receivables collection period: Debtors or Receivables✕365/sales
2014: 270✕365/11500 ≈ 8.57 days
2015: 255✕365/14000 ≈ 6.64 …show more content…
It has stable profit and increasing. GTY offered 1956 pounds as net cash from operating activities and GTY paid 629 pounds to be purchase of Non-Current Assets which can help companies to make more money. It is not doubt that benefit for GTY. However, it is clear for investing that GTY borrow too much long-term liability, which may be a threaten in the future. At the same time, net increase/decrease in cash and cash equivalents show that is positive at 18, which mean GTY are profiting.
The limitation of ratio analysis
As we know, every ratio analysis is did by old and historical data. The result always can be as a reference rather than an exact prediction. Because ratio analysis can not work for accidents. Such as change about management and economic. At the same time, ratio analysis does not let companies know the exact future value. Different companies operate in different industries each having different environmental conditions such as regulation, market structure. Such factors are so significant that a comparison of two companies from different industries might be misleading. (Obaidullah Jan, n.d)
The differences between cashflow and profit
Cashflow is a method for companies to record flow of money (come out or come in) during a period of time. And it will record what is paid for and where money is from. However, profit is total revenue–total expenses. It is a number which shows how much money the company