Norms for evaluation, Financial Accounting

You may just be wondering as to see that how we control activities by ratios. The answer is not tough to seek. Ratios we have known for control of activities measures relationships among key elements at any point of time. That a measure is then compared along with some 'norm' and the causes for deviation investigated. An action plan is after that prepared and implemented to eliminate the causes. For illustration, Nagpur Textile Mills Ltd. reports 89 days of inventories conduct on an average against net sales throughout the year 2002. Here, how do we judge if the diagram of '89 days' is only regarding okay for a firm such as "Nagpur Textile Mills Ltd."? The subsequent appear to be the ways for estimating this figure:

a) Against a trend over time: The subsequent data might be observed for Nagpur Textile Mill:

Year                                         Average Number of days of inventory:

 1998                                                    90

1999                                                    118

2000                                                    115

2001                                                    107

2002                                                    98

Average number of days = Net sales /((opening inventory + closing inventory)/(2/365))

b) Against an average of some past period: The relevant data for Nagpur Textile Mill may be estimated on the origin of the mean of average number of days that are: (90 +118 + 115 + 107 + 89)/5 = 519/5 = 104 days approximately.

c) Against an industry average: A specific number of firms selected randomly or otherwise from textile industry, to that Nagpur Textile Mill Ltd. belongs, may be utilized to estimate the industry average such as a norm. Hence, data relating to average number of days of inventory of, as like 20 textile units of the size and kinds of Nagpur Textile Mills Ltd. might be averaged for an exact year for that Nagpur Textile's ratio is being estimated. Period averages for firms may also be utilized to acquire a grand mean for evaluation.

d) Against an average of a cross-section sample: The Reserve Bank of India publishes financial statistics of joint companies.

Their sample for the period from 1998 or 1999 to 2000 or 2001 as well as 1927 public limited companies along with paid up capital of Rs 100 crores and above. Year-wise averages for corporate sector as an entire are available. In a same manner, the ICICI publishes elaborate data on financial performance of companies assisted through them. The newest study pertains to the year 1984 - 1985 and contained 417 companies in various industry groups. Such sample covers around 50 percent of the whole private corporate sector in terms of paid-up capital. Year-wise average for industry groupings is obtainable.

Posted Date: 4/9/2013 2:06:16 AM | Location : United States







Related Discussions:- Norms for evaluation, Assignment Help, Ask Question on Norms for evaluation, Get Answer, Expert's Help, Norms for evaluation Discussions

Write discussion on Norms for evaluation
Your posts are moderated
Related Questions
i have some homework that need help


The Wanless Corporation provides Internet consulting services to a wide-range of customers. The company's fiscal year ends on December 31. For the year ended December 31, 2011, the

The common stock of Warner Inc. is currently selling at $114 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share

Both IRR and ROCE tenders a relative measure of return in percentage terms a feature that is seen as attractive to managers who may perhaps have difficulty in interpreting the abso

Accounting for Partnerships The owners’ interests in the business are divided into long term and short-term interests. (Long-term interests refer to original capital commitment

Q. What is Asset? Asset - An economic resource which is expected to be of benefit in the future. Probable futureeconomic benefits attained as a result of past transactions or e

The Brownstone Corporation's bonds have 7 years remaining to maturity. Interest is paid yearly, the bonds have a $1,000 par value, and the coupon interest rate is 10%. a.

Q. What is primary financial purpose? The primary financial purpose of a company is typically stated to be the maximisation of shareholder wealth and Sassone plc has declared p

The company incurs a payroll payable of $645 per weekday of operations. The mondays of january are the 3rd, 10th, 17th, 24th, and the 31st. Paydays are every other Friday with payd