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Explain Functional classification
a) Liquidity ratio: these are the ratio which measures the short term solvency or financial position of a firm. These ratios are calculation to comment upon the short term paying capacity of a concem or the firm's ability to meet its current obligations. The various liquidity ratios are current ratio liquid ratio and absolute liquid ratio. Father to see the efficiency with which the liquid resources have been employed by a firm debtor s turnover and creditor's turnover ratios are calculated.
b) Long term solvency and leverage ratio: longer term solvency ratios convey a firm ability debt equity ratio interest coverage ratio and leverage ratio. Show the proportions of debt equity in financing of the firm. These ratios measure the contribution of financing by outsiders. The leverage ratios can further be classified as:
Financial leverage
Operating leverage
Composite leverage
c) Activity ratios: activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed. These ratio are also called turnover ratios because they indicate the speed with which assets are being turned over into sales e.g., debtor turnover ratio. The various activity or turnover ratios have been named in the chart classifying the ratios.
d) Profitability ratios: these ratios measure the result of business operation or overall performance and effectiveness of the firm e.g., gross profit ratio or return on capital employed. The various profitability ratio have been given in the chart exhibiting the classification of ratios according to test. Generally two types of profitability ratios calculated are
In relation to sales and
In relation to investments
Excess machine hours 20,000. Received offers from two companies to buy 210,000 units of F at 0.60 and 300,000 units of D at 0.70. Estimated costs for the two products are;
Question : (a) A company manufactures and sells two products A and B. Presently, it sells 600 units of A and 400 units of B at a price of £24 and £19 respectively. The unit
State the steps for Standard costing system standard costing system involves the following steps 1) Setting-up of standards for each element of cost: standards should be s
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Explain Activities uses through activities based costing In order to correctly associate costs with products and services. ABC assigns cost to activities based on their use of
IF net income totaled $18,000 for one year, beginning assets were $100.000 and ending assets were $140,000, then Return on Assets for the year as a percentage will be?
Material usage variance Difference among standard quantity of material and actual quantity used is the material usage variance. This variance arises due to: Economic use of
Bulk Agency Factoring : In this category factoring is essentially used as a method of financing book debts. In this sort of factoring the client continues to administer credit a
Explain about Programmed budget It having expects revenues and cost of various products or projects that are termed as the main programmers of the firm. Such a budget can be pr
Going rate or follow the crowd pricing:- In this method the firm price its products at the similar level as that of the competition. This method supposes that there will be no
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