ACCT1101 Lecture Notes - Lecture 29: Asset, Debt Ratio, Smap Discography
Document Summary
This (cid:449)as lo(cid:449)e(cid:396)ed i(cid:374) (cid:1006)(cid:1004)(cid:1005)(cid:1007) when the long term loan was repaid: no benchmarks for debt ratio, need to look at individual business circumstances. In both the cunningham text and the vbe, income tax is assumed to be zero. In reality we would use net income before tax in the calculation of both 1. and 2. I(cid:374) a(cid:271)solute te(cid:396)(cid:373)s, pa(cid:373)(cid:859)s pa(cid:396)t(cid:455) shop pt(cid:455) ltd has ge(cid:374)e(cid:396)ated a satisfactory return in 2013: but we would benchmark this against budgeted profit and also similar businesses in the industry. Days in selling period = number of days in business year/ inventory turnover. Ac receivable turnover = net credit sales/average ac receivable. Days in collection period = number of days in business year/ ac receivable turnover. = 32. 76 days: pa(cid:373)(cid:859)s pa(cid:396)t(cid:455) shop pty ltd turns over its inventory approximately every 33 days. Is this reasonable given the nature of the business: collection time for accounts receivable is approximately 33 days.
