Financial Management Accounting Concepts.

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Presentation transcript:

Financial Management Accounting Concepts

Accounting Concepts Business entity Dual aspect concept (Double entry) Money Measurement Objectivity concept Only recorded financial transactions are considered Going Concern Periodicity concept (reporting on Accounting periods) Cost Concept (Historical cost value) Conservatism concept Materiality Concept (Full disclosure of all relevant information) Realisation concept Matching concept Full disclosure (All relevant known future events that may or will have an impact must be disclosed)

Managing finance Investment decisions Financing decisions Large capital expenditure (renovation,refurbishment,expansion) Mergers and acquisitions Management of working capital Financing decisions Capital Structure Dividend policy Purchase of new equipment(lease purchase) Risk management (Long term pricing agreements) Financial planning and tax minimisation Management decisions Performance measurement Budgets Operating and capital expenditure

Financial Accounting and Management Accounting Is concerned principally with information prepared for distribution to stakeholders outside the business. Includes Balance sheets and Income statements for current period and also for previous periods for comparison and evaluation. Management Accounting Is concerned with the information needs of managers within the business. Includes cost control, budgeting, variance analysis, pricing and cost-volume-profit analysis.

Ratio Analysis Ratio analysis is analysis of the relationship between particular items in a financial statement. Assists in spotting trends and problem areas that might be arising. Can be used as comparison tool to similar businesses. Overall performance Profitability Turnover Liquidity Solvency leverage

Ratio Analysis

Ratios Return on Investment Return on Total assets Gross profit Ratio Net Profit Ratio Inventory Turnover Ratio Debtors Turnover Ratio Working capital turnover ratio Current Ratio Quick ratio Solvency ratio Debt to assets ratio Debt to equity ratio Number of times interest covered ratio Labour cost analysis rations Labour cost per cover Covers per labour hour Minutes per occupied room