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Use accounting data and statistical information to measure business performance

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Introduction

Asid Ashraf Unit 7 Management Accounting: P3 Use accounting data and statistical information to measure business performance Prepare the first section of your report, which describes the general use of data you would use to monitor the performance of Mr Jones? business. Previous year?s data regarding sales, costs and profits, can be used initially to determine current performance as it tells you whether the business is growing or not it may well have changed its marketing and pricing strategies and it will want to know whether these have been successful. It may have introduced new products or targeted a new market segment and want to know if sales have improved following these initiatives. Previous year?s data regarding costs can be used initially to determine current performance because it is very important for businesses to monitors costs such as material, direct labour and any direct expenses to ensure it is aiming at efficiency and cost effectiveness of production. A good way is to compare the costs this year with the same costs last year. The business needs to compare the most recent sales figures with those of previous years to see if it is improving or not. ...read more.

Middle

A moving average is the average price of a security over a specified period of time. Analysts frequently use moving averages as an analytical tool to make it easier to follow market trends, as securities move up and down. A series of successive averages of a defined number of variables. As each new variable is included in calculating the average, the last variable of the series is deleted. With the moving average, an accountant employs the most recent observations to calculate an average, using the result as the forecast for the next period. Time series analysis is based on historical data. For Mr Jones business managers must identify whether the data shows a generally upward, downward or a constant trend. To help them to do these businesses will ?smooth out? the raw data by using moving averages. The moving average is usually either 3?period or 4-period, depending how often the average is taken. An financial analysis comparison in which certain financial statement items are divided by one another to reveal their logical interrelationships. Some financial ratios (such as net sales to worth ratio and net income to net sales ratio) ...read more.

Conclusion

should be as high as possible. A negative ROCE would mean that the firm had made a loss. In the UK, ROCEs are typically between 5% and 15%. This will depend on the sector in which the firm operates. Comparable data from other firms. The firms must be in the same industry and should ideally be of a similar size so that meaningful comparisons can be made. Efficiency: These are mainly measures of financial control. They are rarely seen in media headlines (or any other business stories) because they do not dramatically affect the performance (either in profitability or liquidity) of the firm. As a result, these ratios are more likely to be of interest to internal stakeholders of the firm, (managers, Mr Jones, budget holders, etc). These ratios affect how efficiently the firm operates in terms of its working capital management. As stated earlier, these ratios do not directly affect profit, but improvements in these could affect future profitability. Use of Asset ratios: This shows how 'effectively' the net assets (total assets less total liabilities) of the firm are being used to generate turnover. It will depend on the industry, but a rising figure may indicate that assets are being used more efficiently to generate extra sales. ...read more.

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