HND-會(huì)計(jì)考試outcome3

1、HND會(huì)計(jì)測試outcome3Report for account.1. IntroductionThis report is written about a management and a planning tool. Those can help the manager to make some decision by some financial information. And the report will divide three parts according to the SSP ' s statements (yded 31 December 2022) in th

2、e case. The first part is “ Users of financial information that identify four people/organizations who use these accounts and why they require this information and which financial information will supply their needs. The second part is“ Sources of finantteat the sources of finance employed by thecom

3、pany and describe the character of each source. The last part is Ratios analysis about SSP ' s business , which shows cash flow of SSP over the accounting period and gives an overall analysis after reviewing and analysis some important ratios.2. Users of financial informationManagementManagement

4、 refers to those people who study the statements to administer and control the use of the resources. According to the SSP plc's financial statement, these must have management department in terms of paying for administrative expenses based on the financial statement.To allow management to make e

5、ffective decisions, all areas of accounting information are of interest to them. Management will use the accounting information to compare performance with previous years and competitors, identify areas of improvement, plan future resource allocation, decide purchasing and pricing policies, etc.Mana

6、gement will use all financial sources of information, particularly ratio analysis and budgets.Potential shareholdersPotential shareholders Refers to Individuals or organizations that are considering investing in the business through buying ordinary or preferenceshares. According to the SSP plccsiafl

7、insatantement, the Dividends belong toPotential shareholders.Like present shareholders, potential shareholders will be interested in the value of and return on their investment. More specifically, potential shareholders will compare the profitability and future prospects of the company others to asc

8、ertain the best investment option.Potential shareholders will use Capital employed ratio, gearing ratio And appropriation account, Cash flow statement providing information on liquidity,Short-term CreditorsShort-term Creditors was Individuals or organizations that lend the company money or goods sho

9、rt-term credit. In the case, the short-term creditor was pay for trade creditors based on the financial statement.They will be analyzing the liquidity and long-term future of the business toReport for account.decide the level of finance to be given. Short-term investors use the financial information

10、 to evaluate the level of risk and the prospects of money being repaid. Short-term creditors will refer to the cash flow statement, this will show if the company has sufficient funds to pay for stock bought on creditLong-term CreditorsLong-term Creditors was Individuals or organizations that lend th

11、e company money on a long-term basis. According to the SSP plc's financial statement, The Long-t based on the financial statement. The Long-term Creditor was pay for Debentures based on the financial statement.Similarly, long-term creditors will use the financial information to analyze the liqui

12、dity and long-term future of the company to evaluate the level of risk. Long-term creditors will use the financial information in order to determine if interest payment are likely to be made promptly and if the company can make the capital repayments. In addition, this group of user will be interest

13、ed in the value of the assets in terms of collateral when deciding on offering finance.Long-term creditors will refer to the cash flow statement and liquidity ratios. In addition information relating to the collateral can be sourced from the balance sheet.3. Source of financeA table of source of fin

14、ance in terms of financial statement of SSP plc as follows:Source of financeType of financeTerm of financeCreditorsLoan capitalShort-termBill of finance (Debtors)Loan capitalShort-termBank overdraftLoan capitalShort-termDebenturesLoan capitalLong-termOrdinary Share CapitalEquity capitalLong-termReta

15、ined profitsEquity capitalLong-termShort Term Finance is that borrows less than one year and applies to finance seasonal in trading, general working capital requirements or purchasing minor fixed asset with a short working life.Medium Term Finance is that borrows between 2-10 years and applies to fi

16、nance the acquisition of materials, or fixed assets with a medium term life span, to overcome a persistent cash flow problem or finance small-scale expansion.Long Term Finance is that borrows over 10 years and applies to finance the acquisition of fixed assets with a long-term life span or finance l

17、arge-scale expansion.According the SSP ' lc, Phere are two types of finance: Equity capital and Loan capital.Equity capital refers to capital sourced by the owner of the business which include ordinary share capital and reserves that is profit and loss account (inappropriate profit), are no inte

18、rest payment, no repaid payment; moreReport for account.flexibility on the payment of a dividend. But, anyway the owners use the limited liability, the company will fails to pay out a dividend and the share price will fall, leaving the company at risk of a turnover bid.The share capital and reserves

19、 are long-term finance. So the ordinary share dividend paid will vary according to the level of profits. Inappropriate profit is the unused profit remaining is carried into the next trading period.Loan capital is refers to money that is borrowed from a source outside the business. This loan must be

20、repaid in full with interest added. In the case, The SSP strade creditors; bank overdraft and debentures are included in this category. They must be repaid in full with interest added. As the result, there is the possibility of losing the collateral or security if repayments terms are not meet.In th

21、e case, Bank overdraft was short-term loan and that is increased from 0 in 2022 to 86,000 in 2022, this action is a good way to financing. This kind of source is a fairly cheap form of finance with the added advantage of flexibility. In some cases a small overdraft facility may be offered free of ch

22、arge.Trade creditor is another form of short-term finance. In the case, we can see the trade creditor is decrease by 25.6% over one year (2022 - 2022), but this is a not good sign because the Creditors Payment Period Ratio in 2022 is shorter than 2022. Using trade credit may appear to be an interest

23、 free way of raising finance, however, by delaying payment for goods customers may forfeit discounts. Delayed payments can also lead to poor relations with suppliers.Debentures are long-term loans. In the case, the debentures of the two years are the same, it is 1560,000, and we can find this is a l

24、arge part of money in the cash running of this company, which made to companies that carry a fixed rate of interest. The company" sfixed assets normally secure debentures. Debentures may have a fixed time period or an open time period. Debenture holders are not shareholders; therefore it referr

25、ed to as external.4. Ratios analysis about SSP ' s businessa. Profitability Ratios:Gross Profit Percentage: Gross Profit Turnover x 100% 2022:700011674 X100% =59.96%2022:803713382 X 100% =60.05%Return on Capital Employed:Net Profit before TaxReport for account.Ordinary Shareholder EquityX100%202

26、2:11822885 X 100% =40.97%2022:9013305 X100% =27.26%The Gross Profit percentage has increased form 59.96% to 60.05%. This is an improvement on the previous year and show that the company has increased profitability at the trading level.Return on Capital Employed has decreased from 40.97% to 27.26%. T

27、his is not a healthy sign and is due almost entirely to a decrease in Net Profit before Tax of £1182. Existing shareholders will not be happy with the return and potential shareholders might be dissuaded from investing.b. Liquidity Ratios:Current Ratio2022:1195 : 7671.56 :12022:1248 : 7011.78 :

28、1Acid Test:Liquid Assets: Current Liabilities2022:(1195-608 ):7670.77:12022:(1248-796 ):7010.64:1The Current ratio has increased from 1.56:1 to 1.78:1, but this is not healthy as the ratio is currently well bellow the ideal of 2:1. The SSP present level of trade creditors was reduced, the company no

29、w has an $ 86,000 overdraft. Stock has increased by 30.92%.The acid test ratio has decreased from 0.77:1 to 0.64:1(the perfect situation is 1:1).This is not a good sign and since stock is excluded from the calculation, is due entirely the 86,000 overdrafts.c. Efficiency Ratios: Fixed Asset Turnover:

30、TurnoverFixed Assets2022:116744017=2.91 times2022:133824318=3.10 timesStock Turnover:Cost of Goods SoldClosing Stock2022:4674608=7.69 times2022:5345Report for account.796=6.71 timesDebtors Collection Period:DebtorsTurnover x 3652022:30611674x 365 =9.57 days2022:45213382 x 365 =12.33 daysCreditors Pa

31、yment Period:CreditorsCost of Goods soldx 3652022:5444674x365 =42.48 days2022:4055345x 365 =27.66 daysThe Fixed assets turnover ratio has increased slightly from 2.91 to 3.10timesthis is a good sign. Each of fixe d assets now generated $3.10 of sales as opposed to $2.91 the previous year. Fixed asse

32、ts are now being used more efficiently and may be due to reduced downtime on machinery and the replacement of old plant and machinery during year 2022 ($984,000spent on fixed assets).Stock Turnover ratio has decreased from 7.69 times per year to 6.71 times. This is not a good sign. In the case, SSP

33、should investigate stock mix as it may contain some slow moving or obsolete lines. These should be reduced in price to clear.Debtors Collection period has improved with debtors paying 2 days earlier than the previous year, which is a bad trend. Possible reasons are: 1 improved invoicing and/or credi

34、t control. 2 Discounts offered to customers for prompt payment.Creditor ' payment period has decreased from 42 days to 28 days, which is an improvement in a bad situation. Possible reasons for paying earlier are: Improvement in suppliers ' invoicing and/or credit control predures; improved d

35、iscounts from suppliers to encourage prompt payment. When the demand of meat product increased, SSP wanted to use enough stock supplied to ensure their meat fresh in quickly.d. Investment Ratios:Gearing Ratio:Fixed Return CapitalOrdinary Share Capitalx 100%2022:15601950 X 100% =80%2022:1560Report fo

36、r account.1950 X 100% =80%Interest Cover:Profit before interest and taxInterest changes 2022:1416234=6.05 times2022:1135234=4.85 timesGearing ratio has no changes as long-term liabilities and ordinary share capital keep the same during two years.Interest cover ratio has decreased from 6.05 times to

37、4.85times. This is not a good trend indicating that the company is less able to meet interest payments. This trend is due to the decrease in net profit as there is no change in interest charges.Overall summaryAccording to the ratios analysis for SSP plc ' financial data, the profitability appear

38、 that the company should not have a good profit because the company was failure to control expenses and it increased by 23.60% against a sales increase of 14.63%. Furthermore, the liquidity ratios narrate that the company" scash wasn' have a good liquidity because these are amount of stock

39、in the company. And in that time, the company maintain a lot of stock and bought some new fixed assets in terms in currently condition, so the efficiency ratios show that the company" scash is not effective, as the investment ratios 川ustrates that the company" s condition of investment was

40、 not be good because the company wasn' t not invest in other area. Based on above problems, these are some recommendation as follow:Decrease shrinkageIn order to increase capital should sell the stock immediately Should issue more debenture and share capitalImprove creditor span of controlby way

41、 of save money should decrease the other expenseCash flowThe C/F statement summarizes cash inflows and cash outflows and calculates the net change in the cash position for the company, throughout the period between two balance dates. In the case, SSPs 'cash flow was a decrease of 3 367,000 over

42、the one year period. In this year, the SSP had a cash inflow of 1,345,000 that is a good trend, indicating the trade is healthy.Out flow: Interest, Tax, Payments to acquire fixed assets, Dividend. In flow: Net cash flow from operating activities.The significant outflow on the cash flow statement was

43、 984,000 paid for purchase of fixed assets. This is an unavoidable payment but could be reduced in future by issuing ordinary shares instead of debentures. Alternatively, the company couldReport for account.seek to get a lower interest rate.Ordinary share dividend paid was 260,000. This is equivalent to 19% of cash flow from operating activities and is therefore a reasonable amount.Overall, the SSP should make the Credito