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MANAGEMENT ACCOUNTING
MBA 1ST SEMESTER
SUBMITTED TO – SUBMITTED BY –
PROF. HANUMAN PRASAD ROLL NO. 11 - 20
GROUP PARTICIPANTS
• QUICK RATIO
• = C.A.-(STOCK + PRE. EXPENCES)/CURRENT LIABILITY
INTERPRETATION
1.34 2.36
30 September 16 30 September 17
10.35 7.77
0.37 0.37
2.42 2.78
INTERPRETITIONS
• The Debt-Service Coverage Ratio shows the number of times
the earnings of the firms are able to cover the fixed interest
liability of the firm. The ratio has increased from 1.34 to 2.36
which is good as the earnings of the firms has increased in
comparison to its interest liability. Higher the ratio higher is the
ability of the company to meet its interest payment obligations.
• The Interest-Service Coverage Ratio is same as the DSCR and
higher the ratio means higher the ability of a firm to pay its
interest obligation out of its earnings.
• The Debt-Equity Ratio of the company is 0.77 & 0.78 which
shows a greater claim of owners than creditors. During the
periods of low profits the debt surviving will prove to be less
burdensome for a firm with low debt-equity ratio.
• Proprietary Ratio of the company remains same in both
periods i.e. 0.37 and it is not good for the company as it
means poor position of business, because it shows that the
organisation is operated through great degree of outside
funds which means more interference and pressure of
outsiders.
• Fixed Assets to Long-term funds Ratio of the company is 2.42
& 2.78. If the ratio is more than 1 it means large amount fixed
assets portion is financed by long term funds, it means
company is using aggressive policy for obtaining fixed assets
from long term funds. And during the periods it has increased
which is more risky.
ACTIVITY RATIO
• Activity Ratio : Activity ratios measure a firm's
ability to convert different accounts within its
balance sheets into cash or sales. Activity ratios
measure the relative efficiency of a firm based
on its use of its assets, leverage or other
such balance sheet items and are important in
determining whether a company's management
is doing a good enough job of generating
revenues and cash from its resources.
Inventory turnover ratio :
It is an efficiency ratio that shows how
effectively inventory is managed by comparing cost
of goods sold with average inventory for a period.
This measures how many times average inventory is
“turned” or sold during a period.
ITR=COGS/Average Inventories
Or
ITR=Net sales/Inventory
• Calculation : 3,30,180/15087= 1.88 Times
INTERPRETITION
• Since ITR is high ,it implies that organization is
working with less inventory.
• As inventory are maintained low, a firm has
invested less in inventories.
• Inventory conversion period = 365/1.88=194 days
• As the ICP is short, this is a good indicator.
Debtor's Turnover Ratio :
It is an accounting measure used to measure how
effective a company is in extending credit as well as
collecting debts. The receivables turnover ratio is an
activity ratio, measuring how efficiently a firm uses
its assets.
• DTR = Net sales/ Debtors
• Calculation = 3,30,180 / 8177 = 40.3 times.
INTERPRETITION
• High DTR implies that the company is following
strict credit policy.
• Collection period : 365 / 40.3 = 9 days.
• Hence the collection period is low which is good
for the company.
Creditors turnover ratio :
It is calculated by taking the total purchases made
from suppliers, or cost of sales, and dividing it by
the average accounts payable amount during the
same period.
• CTR = Net purchase / Creditors.
• CALCULATION = 42431 / 76595 = 0.55 times
INTERPRETITION