Thank you so much for these teachings. I really appreciate how you simply explain these topics and help us see the logic and common sense 馃檪 behind it. I am writing in December and feel a lot more ready as I watch these videos!
Could you please tell me why we use the number of cost of sales as purchase instead of subtracting the sum of last year鈥檚 ending inventory and cost of sales by this year鈥檚 ending inventory?
As I explain in the lecture, it would be better to use average payables and receivables. However the problem is that we then need both the opening and closing balances. We may have both for one year but if we are comparing this year and last year then we need both balances for both years otherwise it is not a fair comparison.
It depends on what information is given in the question as to whether to use average receivables or closing receivables (although if the information is available then average receivables is better).
And yes, opening receivables for 2007 will be the closing receivables for 2006.
priscilla5236517says
Thank you so much sir for every lecture video..am so grateful.God bless you.
BRIGHT says
Sir please are the formulas given during the exams
AliSher123 says
2006 closing inv is the opening inv of 2007
2007 closing inventory given
Cos given
We can find purchases?
John Moffat says
True. But we cannot find them for both years and when comparing we need to compare the same thing.
AliSher123 says
Thank you
Sulayman1809 says
Hi Sir, just a quick question wouldn’t we know the Purchases if we do Cost of sales + Closing Inventory ?
Therefore,
653 / (5385+1006) * 365 days = 37 days ???
Please enlighten me
Thanking you in advance.
Sulayman1809 says
I’m sorry I meant:
653 / (5385+1006 – 871) * 365 days = 43 days
516 / (4212+871 – 0) * 365 days = 37 days
Thank you.
John Moffat says
What about the opening inventory? (and it would need to be the same workings for both years for them to be comparable).
Asif110 says
Greetings.
What about the operational gearing ratio ?
Is that not in the syllabus?
John Moffat says
It is not mentioned in the syllabus. It is examined in Paper FM and there are free Paper FM lectures on it.
janetm says
Thank you Sir with the lecture its so helpful.
John Moffat says
Thank you for your comment 馃檪
zinthambo says
Thank you so much for these teachings. I really appreciate how you simply explain these topics and help us see the logic and common sense 馃檪 behind it. I am writing in December and feel a lot more ready as I watch these videos!
John Moffat says
Thank you for your comment 馃檪
LMYY says
Could you please tell me why we use the number of cost of sales as purchase instead of subtracting the sum of last year鈥檚 ending inventory and cost of sales by this year鈥檚 ending inventory?
nshemerirwelovinsa@4794244 says
i meant in the exams are given the formulaes
John Moffat says
No – you have to learn them. The formula sheet that you are given in the exam is printed at the beginning of our free lecture notes.
tpile says
sir, why is that you’re calculating net profit margin with PBIT instead of using net profit
tpile says
Also in ROCE why we can’t use net profit instead of PBIT.
In receivables days and payables days why we’re not taking avg trade receivables and avg trade payables ?
John Moffat says
As I explain in the lecture, it would be better to use average payables and receivables. However the problem is that we then need both the opening and closing balances. We may have both for one year but if we are comparing this year and last year then we need both balances for both years otherwise it is not a fair comparison.
tpile says
Thankyou sir
John Moffat says
You are welcome 馃檪
John Moffat says
Because we are measuring how well the business is performing. Tax and interest are not under the control of the managers running the business.
tpile says
Thankyou sir
Tai Wo says
In some of the syllabus, they say we should use average receivables as against receivable
Tai Wo says
Opening receivable for 2007 will be ending of 2006
John Moffat says
It depends on what information is given in the question as to whether to use average receivables or closing receivables (although if the information is available then average receivables is better).
And yes, opening receivables for 2007 will be the closing receivables for 2006.
priscilla5236517 says
Thank you so much sir for every lecture video..am so grateful.God bless you.
John Moffat says
Thank you for your comment 馃檪
jareerabedin says
Sir,
In example 1, if reserves were given, we would have to take into consideration while calculating the total long term capital correct?
Thank you
John Moffat says
Correct.
addisanopacourage says
Thanks John
John Moffat says
You are welcome 馃檪