Accounting Ratios and Monitoring Business Performance

In: Business and Management

Submitted By faircloughs07
Words 1053
Pages 5
Task 11 (D2)
Accounting ratios and monitoring business performance
Ratio analysis can be used as a management tool to monitor and improve the performance of HSBC as well as being used by those outside of the organisation such as bank regulators, potential shareholders and suppliers to look at the performance of HSBC and compare it with other similar organisations.
Information used for comparison must be accurate - otherwise the results will be misleading.
There are four main methods of ratio analysis - liquidity, solvency, efficiency and profitability. If ratios of companies are to be compared it is important that the companies are in the same industry. It would be appropriate to compare HSBC ratios with other the ratios of other banks but not for example a construction company.
Liquidity ratios
These ratios should be used on a daily basis by management to monitor performance and manage cash flow risks.
There are three types of liquidity ratio: * Current ratio - current assets divided by current liabilities. This assesses whether you have sufficient assets to cover your liabilities. A ratio of two for example shows you have twice as many current assets as current liabilities. * Quick or acid-test ratio - current assets (excluding inventory) divided by current liabilities. A ratio of one shows liquidity levels are high - an indication of solid financial health. * Defensive interval - liquid assets divided by daily operating expenses. This measures how long your business could survive without cash coming in. This should be between 30 and 90 days.
A ratio that is specific to banks and therefore HSBC is the Liquidity Coverage Ratio (LCR)
The Liquidity coverage ratio is designed to ensure that financial institutions have the necessary assets on hand to ride out short-term liquidity disruptions. Banks are required to hold an amount of highly-liquid…...

Similar Documents

Academic Performance Monitoring

...purest and simplest definition, academic performance monitoring encompasses any strategy a teacher uses to assess their students’ current level of understanding. Monitoring strategies can be used before, during, and after a lesson not only to provide feedback to the teacher but also to bring students to a higher level of concept mastery. Assessments are one strategy that are most commonly used at the end of a chapter or unit. However they can also be used at the before a unit to see if students have any prior knowledge about a topic. It is crucial that a teacher knows that objective ability that they are testing for, it could even be helpful to write a test based on the curriculum before planning the unit that way the learning objective for each lesson will correspond with concepts they will need to know for the test. This is not to say that you should teach directly to the questions test but to an ability or concept that both the lessons and the test address. For example, if a Biology teacher were to teach a unit on how predator-prey interactions create healthier populations of both predator and prey the example given in class could be of elk and wolves, whereas the question on the test may go like this, “From your understanding of predator-prey interactions explain why hunting is beneficial for both deer and human populations.” Assessments written in this manner will give you better evidence of concept attainment. Another monitoring strategy is often the most practical......

Words: 1122 - Pages: 5

Financial Performance of a Business

...activity in a business, it gives direction and helps reach the targets easily. Budget is a plan – quantified in monetary terms – which covers income, expenditure and capital investment and prepared prior to a defined period of time.  It is always for the future.  The time for which prepared is certain (6 months / 1 year / 3 years).  Prepared in quantitative details.  Reflects well-defined objectives and roles in organizations. The roles that budgets traditionally play in organizations are as follows: 1. To ensure the achievement of the organization’s objectives. Targets may be set for individual departments and organization as a whole to be achieved within the timescale of the budget plan. 2. To compel planning and decision-making. Planning makes management to look in future, to make decisions, to prepare detailed plans for attaining the targets, to foresee problems and give the organization direction. 3. To communicate ideas and plans. Each person affected by the plans should be aware of what he or she is supposed to be doing. Hence one-way or two-way communication is necessary in each level of organization. 4. To co-ordinate activities. It is important to co-coordinate all the activities of different departments of organization in order to ensure maximum integration of effort towards common goals. 5. To provide a framework for responsibility. Personal managers’ control is required to achieve budget targets. 6. To establish a system of monitoring and......

Words: 2422 - Pages: 10

Performance Monitoring

...Performance Monitoring Author Note This paper is being submitted on September 12, 2013, for N234/CET2810C Section 01 Microsoft Exchange Server course. Performance Monitoring Exchange Server monitoring aims to optimize the performance and availability of the Microsoft Exchange messaging environment. Exchange Server monitoring tools track data that can direct the resolution of operational issues to simplify administration. An Exchange Server monitoring tool allows administrators to improve productivity and control costs. When you are troubleshooting or optimizing a server for performance, you can use performance monitoring to track the activities of Exchange messaging components. Performance Monitor graphically displays statistics for the set of performance parameters you’ve selected for display. These performance parameters are referred to as counters. Performance Monitor displays information for only the counters you’re tracking (TechNet, 2011). Thousands of counters are available, and these counters are organized into groupings called performance objects. When you install Exchange Server 2010 on a computer, Performance Monitor is updated with a set of objects and counters for tracking Exchange performance (Microsoft, 2010). You’ll find dozens of related performance objects for everything from the Microsoft Exchange Availability Service to the Microsoft Exchange Journaling Agent to Microsoft Exchange Outlook Web Access. There are a few third party vendors out......

Words: 423 - Pages: 2

Accessing the Financial Performance Using Accounting Ratios of Barclays Bank Ghana Limited

...1.0 INTRODUCTION 1 1.2 OVERVIEW OF INDUSTRY 2 2.0 COMPANY PROFILE 14 2.1 WHAT IS IMPRESSIVE ABOUT BBGL 15 3. ACCOUNTING POLICIES 17 4.0 FINANCIAL ANALYSIS 20 4.1 RATIO ANALYSIS 20 4.2 COMMON SIZE ANALYSIS 24 4.3 TREND ANALYSIS 25 5.0 EVALUATION AND CONCLUSION 27 6.0 WORKINGS 28 7.0 REFERENCES 34 1.0 INTRODUCTION With encouragements from the Ghana Stock Exchange for companies to be listed, it is very expedient that companies who show interest in being listed provide a profitable and an efficient view of the company to prospective investors. This is achieved in its financial statements. The decision to invest or not to invest in a company depends on the effectiveness and efficiency of the firm under consideration. Using various financial statement analysis tools, the potential investor may be able to make a decision to invest. The decision to invest does not only affect the investor but the firm as a whole. The firm will be able to raise enough capital to finance its operations. For firms whose capital requirements do not meet the requirement set by the bank of Ghana in February 2008 with deadline being December 2012, this is an avenue where such firms can fulfil this new requirement. With the current developments in the banking industry, banks of which Barclays bank is of no exception, should work at not only being profitable but also given investors value for their money. 1.2 OVERVIEW OF INDUSTRY In anticipation of the expected economic growth......

Words: 7280 - Pages: 30

D2 Evaluate the Adequacy of Accounting Ratios as a Means of Monitoring the State of the Business in a Selected Organisation, Using Examples:

...D2 evaluate the adequacy of accounting ratios as a means of monitoring the state of the business in a selected organisation, using examples: The importance of ratios in any business is very important because it gives the business a better understanding of the financial data. By using ratios the business is able to compare data from the current year with the previous years. From this the business will know and be able to identify if they are making more profit or a loss or if they just broke even. There are four types of ratios that a business has to calculate. These are things like investment ratio, financial ratio, profitability ratio and utilization ratio. From the results shown you can see if the business profits are increasing which is a positive thing and shows the company is on a rise and they are making money, this is a steady rise in the company’s money. If the results show a decrease it means that the company is making a loss. another one you can evaluate is the net profit margin as this is helpful as it shows how profitable the company has been throughout the years and whether it is increasing in profit or not. Current ratio is the most effective because it shows you whether you can have enough money to pay back your debts. The ratio shows that they have more liabilities it means they would struggle to pay off their debts. A figure below one means that the business does not have enough current assets to pay off its debts, a figure between 1 and 1.5 means......

Words: 396 - Pages: 2

D2 - the Adequacy of Accounting Ratios

...Evaluate the adequacy of accounting ratios as a means of monitoring the state of a business in a selected organisation, using examples. 1.0 Terms of reference In this report, I will be evaluating the adequacy of accounting ratios, so that the owner can keep an eye on what condition is their business in. This will able the business to see whatever they are making profit or making loss. The business which I will particular focus at will be ISIS. Also, this report will include the advantage and disadvantage of using a profit & loss and balance sheet; I will outline the purpose of accounting ratios, plus take in account of the advantages and the limitations of each ratio, I will be also judge on how well the business is doing, and finally, I will conclude this report and give out my recommendation. 2.0 Advantages & limitations of using a P&L and Balance sheet for ISIS 3.1 Profit and loss account A profit and loss account gives us an overview on how well or bad the business has done with their finance, it will also include a record of their profit and loss. To make it even clear, it is a financial statement that summarises the revenue, cost and expenses of the business during the financial year. If the business has made profits, they will remain the same on their trading performance or if they eager to make more profit, they have to try to figure out something new to bring the business to another level. However, if the business has a made a......

Words: 1607 - Pages: 7

D2- Can You Evaluate the Adequacy of Accounting Ratios as a Means of Monitoring the State of the Business in a Selected Organisation, Using Examples?

...D1- evaluates the appropriateness of business information used to make strategic decisions. The two functions I am going to be talking about is finance and marketing for my organisation which is H&M. Marketing: Marketing is the action or business of promoting and selling products or services, including market research and advertising. Market research is the action or activity of gathering information about consumers' needs and preferences. H&M need to use market research in order to improve their business and make further plans for the future. Also use advertising to promote their products. It is vital for H&M to do this because they need to know what their customers like and dislike also if there is an issue, what the issue is and how they can overcome it. They need to sell their price at the right price so it is affordable for customers and so on. H&M need marketing to find out customers reviews. This is because they need to know what to improve in and what to change in order to make the business even better and more successful in the future. In H&M the marketing manager needs customer’s views. The customers need satisfaction and complaints which allows the business to expand. If this is not done then customers will not want to come back because they will think H&M are not bothered about their customers and only their products which will put H&M’s name at risk for this reason they need to consider customers views and try and change where......

Words: 344 - Pages: 2

Accounting Ratio

...Liquidity Ratios • Measures the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. • Ratios include the current ratio, the acid-test ratio, receivables turnover, and inventory turnover. Liquidity ratio = current asset___ current liabilities = 360042949 266476991 = 1.35 Asid test ratio = cash + short - long term investment + receivable (net) Current liabilities = 238446962+26656729+76692918____________________ 266476991 = 1.28 Receivable turnover = __Net credit sales____ Average net receivable = 574273012 (238446962+138220476)/2 = 3.049 : 1 365 days / 3.049 times = 119.71 days This means that receivables are collected on average every 217 days Inventory turnover = cost of goods sold Average inventory = 461246689 (18246340+2574857)/2 = 44.31 Profitability Ratios • Measures the income or operating success of a company for a given period of time. • Income, or lack of it, affects the company’s ability to obtain debt and equity......

Words: 391 - Pages: 2

Accounting Ratios

...was registered with the patent office in Berlin. The registered trademark FAG, which stands for Fischers Aktien-Gesellschaft, is protected in over 100 countries today. In 1909 Georg Schäfer takes over the “First Automated Cast Steel Factory, previously Friedrich Fischer, AG“ (“Erste Automatische Gußstahlkugelfabrik, vormals Friedrich Fischer, AG“)  The Schaeffler Technologies AG & Co. KG (also known as Schaeffler Group respectively Schaeffler Gruppe inGerman) is a privately owned major manufacturer of rolling element bearings for automotive, aerospace and industrial uses. In Germany, the main brands of the Schaeffler Group – INA, FAG and LuK – are marketed by Schaeffler Technologies AG & Co. KG and LuK GmbH & Co. oHG. Business of the Company Rolling And Plain Bearings * Deep grove ball bearing * Angular contact ball bearings * Single row angular contact ball bearings Linear Rolling Bearings And Linear Plain Bearings * Monorail guidance system * Roller monorail guidance system * Ball monorail guidance system * Mounting and dismounting * Mechanical tools * Mounting tools set Maintanence Services * Mounting * Lubrication * Corrective maintenance Management The Schaeffler Group is managed by the executive board of Schaeffler AG. Under the new organizational structure, the executive board consists of the Group CEO and the CEOs of the divisions and functions. The Schaeffler executive board is directly......

Words: 620 - Pages: 3

Monitoring and Assessment of Work Performance

...Explain the factors involved in planning the monitoring and assessment of work performance. 4.2. Factors involved in planning the monitoring and assessment of work performance. 4.3. Evaluate the success of the Assessment. 4.4. Explain ways to motivate staff to achieve objectives 4.1. Explain the factors involved in planning the monitoring and assessment of work performance. Business pressures are ever-increasing and organizations are now required to become even more effective and efficient, execute better on business strategy, and do more with less to remain competitive. This puts focus on the work process and improving efficiency in how it is carried out. A work process is a series of steps or activities that use different organization resources (e.g., information, raw materials, human labor, machinery, supplies) to provide a product or service. When thinking about how work gets done in an organization, we usually focus on how people do their jobs and how each team and department gets the work done. Organizations are implementing innovative solutions to ensure that work processes deliver real results and improve business performance. Managers use many assessment tools and processes to assess, improve and monitor work processes. What is Performance Assessment? Performance assessment is a process that......

Words: 2201 - Pages: 9

Performance Evaluation and Ratio Analysis

...Bankers Rahman Rahman Huq Member Firm of KPMG 9, Mohakhali C/A, Dhaka Legal Advisor Mahmood Jabbar Khan Barristers & Advocates Summit Centre (6th floor), 18, Kawran Bazar C/A Dhaka-1215 Standard Chartered Bank Dutch Bangla Bank Ltd. Commercial Bank of Ceylon The Premier Bank Ltd. Bank Al Falah Limited Shahjalal Islami Bank Limited IIDFC BRAC Bank Limited Sonali Bank Limited 5 NOTICE Notice Agenda: OF THE 14th ANNUAL GENERAL MEETING is hereby given that the 14th Annual General Meeting of the Shareholders of Summit Power Limited will be held on Thursday the 26th day of May 2011, at Army Golf Club, “GOLF GARDEN” on the VIP road, Opposite Radisson Water Garden, Dhaka Cantonment, Dhaka, at 11.00 A.M. to transact the following business: 1. To receive and adopt the Directors’ Report and the audited financial statements for the year ended December 31, 2010 together with the auditors report thereon. 2. To declare dividend for the year 2010 as recommended by the Board of Directors. 3. To elect Directors in place of those retiring under Article 23(a) of the Company’s Articles of Association. 4. To appoint auditors for the year 2011 and to fix their remuneration. By order of the Board Dhaka. May 08, 2011 (Mahmud Hasan FCMA) Company Secretary Notes: 1. Shareholders whose names appeared at the record date i.e. April 10, 2011 in the Share Register of the Company or in the Depository Register on that date will be eligible to attend and vote in the Annual......

Words: 40084 - Pages: 161

Business Accounting

...Task 2 Content and Analysis of Financial Reports ( P&L and B/S ) for Wansbeck Motors Inc. The most important objects of the accounting and reporting are Profit and Loss Account ( Income Statement ), Balance Sheet ( Statement of Financial Standing ) and Cash Flow Statement. The financial statements provide information about an entity's: [IAS 1.9] * assets * liabilities * equity * income and expenses, including gains and losses * contributions by and distributions to owners (in their capacity as owners) * cash flows. A complete set of financial statements includes: [IAS 1.10] 1. a statement of financial position (balance sheet) at the end of the period 2. a statement of profit or loss and other comprehensive income for the period 3. a statement of changes in equity for the period 4. a statement of cash flows for the period 5. notes, comprising a summary of significant accounting policies and other explanatory notes 6. comparative information prescribed by the standard The financial statements must "present fairly" the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses. Everything is about what ( a position ), where ( P&L, B/S, outside B/S), at which value and at what time......

Words: 2261 - Pages: 10

Accounting Ratios

...CHAPTER 3 – ANALYZING FINANCIAL STATEMENTS Questions LG1-LG5 1. Classify each of the following ratios according to a ratio category (liquidity ratio, asset management ratio, debt management ratio, profitability ratio, or market value ratio). a. Current ratio – liquidity ratio b. Inventory turnover ratio – asset management ratio c. Return on assets – profitability ratio d. Accounts payable period – asset management ratio e. Times interest earned – debt management ratio f. Capital intensity ratio – asset management ratio g. Equity multiplier – debt management ratio h. Basic earnings power ratio – profitability ratio LG1 2. For each of the actions listed below, determine what would happen to the current ratio. Assume nothing else on the balance sheet changes and that net working capital is positive. a. Accounts receivable are paid in cash – Current ratio does not change b. Notes payable are paid off with cash – Current ratio increases c. Inventory is sold on account – Current ratio does not change d. Inventory is purchased on account– Current ratio decreases e. Accrued wages and taxes increase – Current ratio decrease f. Long-term debt is paid with cash – Current ratio decreases g. Cash from a short-term bank loan is received – Current ratio decreases LG1-LG5 3. Explain the meaning and significance of the following ratios a. Quick ratio - Inventories are generally the least liquid of a firm’s current assets. Further, inventory is the......

Words: 6484 - Pages: 26

D2 Evaluate the Adequacy of Accounting Ratios as a Means of Monitoring the State of the Business in a Selected Organisation, Using Examples:

...the ratios in all business in the world are very vital to the business as it helps the business understand how they are perfoming and understnad their financial data. By using ratios the business is able to compare data from the current year with the previous years. for this businees,we will be able to know if they are making more profit or a loss or if they just broke even. There are four types of ratios that a business has to calculate. These are things like investment ratio, financial ratio, profitability ratio and utilization ratio. From the results shown you can see if the business profits are increasing which is a positive thing and shows the company is on a rise and they are making money, this is a steady rise in the company’s money. If the results show a decrease it means that the company is making a loss. another one you can evaluate is the net profit margin as this is helpful as it shows how profitable the company has been throughout the years and whether it is increasing in profit or not. Current ratio is the most effective because it shows you whether you can have enough money to pay back your debts. The ratio shows that they have more liabilities it means they would struggle to pay off their debts. A figure below one means that the business does not have enough current assets to pay off its debts, a figure between 1 and 1.5 means that they have just enough assets at the moment to pay off their debts and a figure that is above 1.5 means that the business......

Words: 348 - Pages: 2

Monitoring Employee Performance in Nepal

...MONITORING EMPLOYEE PERFORMANCE AT PROSHORE An individual term paper JUNE 27, 2016 KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT Submitted by Prarambha Dahal, 15306 Table of contents Introduction ................................................................................................................................................... 2 Conceptual review ........................................................................................................................................ 2 Application perspective ................................................................................................................................ 4 Key issues and their implications.................................................................................................................. 5 Recommendations for improvement in practices.......................................................................................... 6 References ..................................................................................................................................................... 8 Introduction Monitoring employee performance is one of the toughest challenges in management without appearing too intrusive, authoritative or controlling. However, it is a key component in improving performance. As an important component of employee performance management, monitoring has become an integral practice in well-managed private enterprises. While most reports on employee and......

Words: 1510 - Pages: 7