Analysis of Publish Accounts

It helps a business pay back its short-term debts and avoid insolvency.

It increases the business's profit margins.

It allows a business to expand rapidly without risk.

It reduces the need for financial ratios.

Inventory is the most liquid asset and can be sold quickly

Inventory is the least liquid form of current assets and may take time to sell

Inventory is a liability, not an asset

Inventory is included in all liquidity ratios

Introduce new capital

Sell off excess inventory

Increase long-term loans

Reduce the credit period for customers

(Gross profit / Sales revenue) × 100

(Sales revenue / Gross profit) × 100

(Total costs / Sales revenue) × 100

(Net profit / Sales revenue) × 100

Raising prices while keeping costs the same

Increasing variable costs

Reducing sales revenue

Increasing overhead costs

It helps a business maximise profits by utilising assets and liabilities effectively.

It is not related to cash flow management.

It can boost a business's competitiveness.

It is only important for large businesses.

It means more stock is sold and profit is generated more efficiently

It means stock is held for longer periods

It means the business is less profitable

It means more obsolete stock is held

Reorder from suppliers more regularly

Seek lower-cost suppliers

Dispose of obsolete inventory

Increase product range

Send out invoices promptly

Provide incentives for early payment

Refuse to provide further goods unless outstanding debts are paid

Delay payments to suppliers

Develop close relationships with suppliers

Improve the business's credit rating

Seek suppliers that offer extended trade credit terms

Delay payments to suppliers as long as possible

High gearing means a business has a high level of borrowing relative to equity capital

Low gearing means a business is at higher risk but may generate higher returns

Banks use gearing ratio to judge if a business can afford more debt

High gearing always leads to fast growth

Lower interest rates on future borrowings

Reduced profitability

Easier access to additional funds

Higher share price