ratios analysis

You will either be comparing the ratios for the same company this year with the previous year, or you will be given the ratios for other companies in the same business and you will compare with those.

Dear Mr. Moffat I have 2 questions relating to APX Co 12/09 question. 1. When calculating the next year receivables, inventories and payables, why they don't take into account the average figures? As e.g. the inventory turnover period is (average inventories/COS)*365 so the next year inventories should be ((COS*110/365)-1.2 mln)*2.The same with the receivables and payables. 2. In the statement of financial position current liabilities should not incurred the figures of dividends payable and tax payable, and after it balance the overdraft? Thank you in advanse.

1. In ratio analysis, we usually use end of year figures for receivables etc.. It would be more accurate perhaps to use averages, and if you had done that for this question, you would still have got the marks (provided as always it was clear in your workings what you were doing - the marks are for the workings rather than for the final answer. 2. There obviously could be the need for a tax liability and a dividend liability, but neither were shown as liabilities in the statements given in the question. This would suggest that they are paying tax as it arises (so no end of year liability). Also, we never show a liability for dividends unless they have been approved but not paid, at the end of the year. Again, because there is no liability showing in the statement given in the question, it suggests that any dividends are paid during the year.