Financial Activity Net Profit Ratio Roe ROA Case Study

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Financial Activity

Net profit ratio

ROE

ROA

Working capital quick ratio

A/R ratio inventory turnover debt ratio equity ratio

These ratios indicate that the company has experienced superior performance in terms of revenue and profitability vs. The industry. The company has more gearing, and turns its inventory over better. The liquidity ratios are not as good as those of the industry average.

Given those characteristics, the organisation must report according to Australian GAAP. That is for the financial statements, but the organisation will also have to file taxes as well, including GST forms and documents relating to the superannuation fund.

Five reports and returns to file are the corporate tax return, the fringe benefits tax, the GST, and a taxable payments report.

The company likely pays corporate tax (to the Australian Tax Office), GST, property taxes (to the local government), excise taxes (to the ATO) and fuel taxes, which are built into the price of the fuel.

5. There could be a deduction for the superannuation fund, it would claim its business expenses of course because income tax is paid on net income. Further, there may be a vehicle deduction .

6. The source documents will relate to all transactions. Each transaction should be documented, so there should be invoices for supplies, purchase orders and receipts for sales that the company has made. There will be payroll slips as well, as well as things like tax and interest paid. Every transaction needs to be documented.

7. These need to be collected daily, with each transaction entered into the accounting system.

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The system should be reconciled with bank data frequently, to ensure that all of the transactions have been recorded. The company needs to have a system whereby every single transaction has a paper record, and all paper records are forwarded to the appropriate accounting personnel.

8. There are several policies and procedures that can deal with this issue. First, all transactions should be entered into T-accounts, so that the accounts are inherently balanced. Second, there should be an internal auditor that periodically reviews the documents to ensure that they have been entered accurately. Third, there should be more training. There is no excuse for professional bookkeeping/accounting staff to routinely make errors entering information into the accounting system. The system should be designed to identify when something does not balance, but the staff should be trained to ensure a higher standard of data entry accuracy.

9. I am not sure what "user friendly format" means. Ratio analysis is a basic business skill -- the manager needs to learn it. The analysis can be presented in plain English, of course, but beyond that there is no justification for dumbing it down. It's not quantum mechanics -- if an undergrad can learn it, so can someone who is paid to know that sort of thing.

10. I do not know what the current valuation policies are, so I do not know if these market values should be recorded according to policy. However, firms usually use historical cost of….....

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