Norms for evaluation, Financial Accounting

Assignment Help:

You may just be wondering as to see that how we control activities by ratios. The answer is not tough to seek. Ratios we have known for control of activities measures relationships among key elements at any point of time. That a measure is then compared along with some 'norm' and the causes for deviation investigated. An action plan is after that prepared and implemented to eliminate the causes. For illustration, Nagpur Textile Mills Ltd. reports 89 days of inventories conduct on an average against net sales throughout the year 2002. Here, how do we judge if the diagram of '89 days' is only regarding okay for a firm such as "Nagpur Textile Mills Ltd."? The subsequent appear to be the ways for estimating this figure:

a) Against a trend over time: The subsequent data might be observed for Nagpur Textile Mill:

Year                                         Average Number of days of inventory:

 1998                                                    90

1999                                                    118

2000                                                    115

2001                                                    107

2002                                                    98

Average number of days = Net sales /((opening inventory + closing inventory)/(2/365))

b) Against an average of some past period: The relevant data for Nagpur Textile Mill may be estimated on the origin of the mean of average number of days that are: (90 +118 + 115 + 107 + 89)/5 = 519/5 = 104 days approximately.

c) Against an industry average: A specific number of firms selected randomly or otherwise from textile industry, to that Nagpur Textile Mill Ltd. belongs, may be utilized to estimate the industry average such as a norm. Hence, data relating to average number of days of inventory of, as like 20 textile units of the size and kinds of Nagpur Textile Mills Ltd. might be averaged for an exact year for that Nagpur Textile's ratio is being estimated. Period averages for firms may also be utilized to acquire a grand mean for evaluation.

d) Against an average of a cross-section sample: The Reserve Bank of India publishes financial statistics of joint companies.

Their sample for the period from 1998 or 1999 to 2000 or 2001 as well as 1927 public limited companies along with paid up capital of Rs 100 crores and above. Year-wise averages for corporate sector as an entire are available. In a same manner, the ICICI publishes elaborate data on financial performance of companies assisted through them. The newest study pertains to the year 1984 - 1985 and contained 417 companies in various industry groups. Such sample covers around 50 percent of the whole private corporate sector in terms of paid-up capital. Year-wise average for industry groupings is obtainable.


Related Discussions:- Norms for evaluation

Dealing with changes in the trust-trusts laws and accounts, Dealing with ch...

Dealing with changes in the trust Profits or losses on disposal of investments should be treated as belonging to that part of the fund out of which they accrued. If not app

What is leveraged lease, Q. What is Leveraged Lease? Leveraged Lease - ...

Q. What is Leveraged Lease? Leveraged Lease - Transaction under which LESSOR borrows funds to acquire property which is leased to a third party. Property and lease rentals are

Payments needed?, Payments needed? Zach Taylor is settling a $27,000 loan d...

Payments needed? Zach Taylor is settling a $27,000 loan due today by making 6 equal annual payments of $6018.83. What payments must Zach Taylor make to settle the loan at the inter

Brushy mountain mining''s stock, Brushy Mountain Mining Company's ore reser...

Brushy Mountain Mining Company's ore reserves are being depleted, so its sales are declining. Also, its pit is getting deeper every year, so its costs are rising. As a result, the

Illustration of pension funds, Normal 0 false false false ...

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4

Concept of accounting, what is the implication of applying accounting conce...

what is the implication of applying accounting concepts wrongly

Current yields for t-bonds, ACT presently is all-equity financed. This refl...

ACT presently is all-equity financed. This reflects the stance of the former CEO, a dominant personality who stated repeatedly: "I don't want us to be in thrall to the demands of t

Financial accounting theory, accountability through conceptual framework in...

accountability through conceptual framework in australia eassy on this topic with research

Determine the basis of the ultimate cost of the payment, Given information:...

Given information: Offered a $20 million commercial loan priced using a 3month LIBOR index+100bp. After some preliminary research, using a money center bank's swap trading desk

Explain the theoretical impact on the risk discount rate, Question: A p...

Question: A proprietary life company issues only non-profit guaranteed growth bonds. The company invests only in equities with an expected return of 10% p.a, the risk free rate

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd