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FINANCIAL ACCOUNTING

Buckingham College of London. FINANCIAL ACCOUNTING. ABE (Diploma in Business Management). Lecturer : M. M. Ahsan Email : ahsan6960@gmail.com Session : 01 Week : 08 & 09 Lecture No : 08 & 09 Date : 06 /03/2012 & 13/03/2012. Notes.

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FINANCIAL ACCOUNTING

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  1. Buckingham College of London FINANCIAL ACCOUNTING ABE (Diploma in Business Management) • Lecturer : M. M. Ahsan Email : ahsan6960@gmail.com • Session : 01 Week : 08 & 09 • Lecture No : 08 & 09Date : 06/03/2012 & 13/03/2012

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  3. Assessing Financial Performance

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  5. Why Ratio Analysis? • To compare the performance of the business with previous years • To compare the actual performance of the business with the budgeted or planned performance • To compare results with the performance of similar businesses.

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  7. Common Accounting Ratios • Profitability • Efficiency • Liquidity • Capital structure • investment

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  9. Drawbacks and Limitations • Ratios deal mainly in numbers – they don’t address issues like product quality, customer service, employee morale and so on • Ratios largely look at the past, not the future.  However, investment analysts will make assumptions about future performance using ratios • Ratios are most useful when they are used to compare performance over a long period of time or against comparable businesses and an industry – this information is not always available • Financial information can be “massaged” in several ways to make the figures used for ratios more attractive. 

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  11. Issues in interpretation Financial dangers and their detection : • Declining sales • Excessive expenses • Shortage of working capital • Excessive inventories • Slow-paying debtors • Non-current assets needing replacement • Diminishing returns • Over trading

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