Table of Contents

Introduction........................................................................................................................2
Major Finding....................................................................................................................2
I. Scenario 1................................................................................................................2
1. Task 1:..................................................................................................................2
2. Task 2...................................................................................................................3
Table 4: Income statement for the month ending October 31, 2023............................5
Table 5: Statement of financial position as of October 31, 2023.................................6
II SCENARIO 2:............................................................................................................6
1. Calculate ratios for Kimmer Ltd. in 2022........................................................6
2. Compare the performance of Kimmer Ltd between 2022 and 2021.................8
Table 7: Kimmer Ltd.’ performance of in 2022 and 2021...........................................9
3. Evaluate the performance of Kimmer Ltd. over time...................................13
Table 8: Performance of Kimmer Ltd. over time (2022, 2021, 2020)........................14
4.Critically evaluate financial statement to assess organisational performance
using a range of measures and benchmarks..........................................................15
II. SCENARIO 3....................................................................................................15
1. The monthly cash budget for the last quarter of DEPOT Ltd.....................15
Table 9: Monthly cash budget for the last quarter, 2023 (DEPOTLtd.)....................16
2. The benefits and limitations of budget do for DEPOT Ltd..............................16
3. Corrective measures and problem-solving for DEPOT Ltd............................17
Conclusion........................................................................................................................18
References.........................................................................................................................19

Introduction
Accounting is the systematic recording and organization of economic transactions,
including expenses, revenue, and other financial data. The objective of this is to enhance
informed decision-making within an organizational structure. This research highlights the
crucial role of accountants in formulating financial projections and statements.
 Major Finding
I. Scenario 1
1. Task 1:
Revenue Amount ($)
Service Revenue 255000
Expense
Supplies expenses 90000

Salaries and Wages expense

65000
Depreciation expenses 9000
Rent expenses 60000
Utilities expenses 12000
Total Expense 236000
Net Income 19000

Table 1: Income Statement of MT Business for the year ending September 2023

Assets Amount ($)

Current Assets
Cash 18000

Receivalbles 3000
Supplies 12000
Prepaid rent 16000
Total Current Asset 49000
Long Term Assets
Equipment 75000
 Accumulated Depreciation — equipment 5000
Total Long Term Assets 80000
Total Asset 129000
Liabilites
Current Liabilities
Accounts payable 10000
Overdrafts 5000
Total Liabilites 15000
Equity
Taylors’ Capital 85000
Total Equity 85000

Table 2: Statement Of financial position of MT Business as of September 30, 2023

2. Task 2
The table above shows the costs of activities at MT Business for the month ending
October 31, 2023, along with any necessary adjustments. In that case:
- $6,000 worth of goods on hand, so the MT business has used $6,000
- It's $5,750 now that you add the $750 for accumulated depreciation.
- On October 31, the unpaid salary was $5,500 plus $50, which equals $5,550. The next
month's electricity bill was $1,000.
—Revised unearned service pay of $2,000 has been entered.

Before Adjustments Adjusted

 Debit Credit Debit Credit Debit Credit
Cash 29000 29000
Receivables 2500 2500
Supplies 12000 6000 6000
Supplies expense 6000 6000
Prepaid rent 10000 10000
Equipment 75000 75000
Accumulated
Depreciation— 5000 750 5750
equipment
Depreciation
750
expense 750
Accounts payable 10000 10000
Taylor’s Capital 104000 104000
Unearned service
2000 2000 0 0
revenue
Service Revenue 19000 2000 21000
Utility expense 1000 1000
Utility payable 1000 1000
Salaries and wages
expenses 5500 50 5550
Salaries and wages
payable 50 50
Rent expense 6000 6000
Total 140000 140000 9800 9800 141800 141800

Table 3: Appropriate Adjustment for the month anding October 31, 2023
 Amount
Revenue
($)
Service Revenue 21000

Supplies expenses 6000

Salaries and wages expenses 5550
Expense
Depreciation expenses 750

Rent expenses 6000

Utilities expenses 1000

Total Expense 19300

Net Income 1700

Table 4: Income statement for the month ending October 31, 2023

Assets Amount($)
Current Assets
Cash 29000
Receivalbles 2500
Supplies 6000
Prepaid rent 10000
Total Current Asset 47500
Long Term Assets
Equipment 75000
Accumulated Depreciation —
5750
equipment
Total Long Term Assets 80750
 Total Asset 128250
Liabilites
Unearned services revenue 0
Current Liabilities Salaries and wages payable 50
Utilities payable 1000
Accounts payable 10000

Total Liabilites 11050

Equity
Taylors’ Capital 104000
Total Equity 104000

Table 5: Statement of financial position as of October 31, 2023

II SCENARIO 2:
1. Calculate ratios for Kimmer Ltd. in 2022
 Question Formula Number Value

Total
assets Sale revenue 124,000
turnover Average total assets (101,000+103,000)/2

(times) 1.22

Average
inventory Average inventory (30,000+ 22,000)/2
365 × 365 ×
turnover Cost of goods sold(COGS) 82,000

period (days) 115.73

Average
settlement
period for Average trade receivable ( 34 , 000+32,000 ) /2
365 × 365 ×
trade - Revenue 124,000

receivables(d
ays) 96,34

Average
settlement
period for Average trade payable (5.000+ 0)/2
365 × 365 ×
trade COGS 82,000

payables(days
) 11.13

Net profit Net income 18,600

x 100 %
margin(%) Revenue 124,000 15%

Gross
Revenue−COGS 124,000−82,000
profit margin x 100 %
Revenue 124,000
(%) 33.87%

Net income 18,600

ROA (%) x 100 %
Average total assets (101,000+103,000)/2 18.24%

Net income 18,600

ROE (%) x 100 %
Average total equity (64 ,000 +66 , 0 00)/2 28.55%

Current Current assets 77,000

 2. Compare the performance of Kimmer Ltd between 2022 and 2021
2022 2021 2022-2021 Industry
average
1.22 1. -0.14
Total assets turnover (times) 36 2.00
Average inventory turnover period (days) 115.73 89 26.37 60
Average settlement period for trade receivables 96.34 13,34
(days) 83 65
Average settlement period for trade payables 11.13 -37,47
(days) 48.6 45
Net profit margin (%) 15% 19.4 -4.4 20.0
Gross profit margin (%) 33.87% 35.7 -1,83 35.0
ROA (%) 18.24% 26.4 -8.18 27.0
ROE (%) 28.55% 41.2 -12,65 40.0
Current ratio (times) 11 5.9 5.1 2
Quick ratio (times) 6.71 4.1 2.61 1
Debt-to-equity ratio (times) 0.67 0.38 0.29 0.5
Interest cover ratio (times) 8.33 35 -26.67 25

Table 7: Kimmer Ltd.’ performance of in 2022 and 2021.

The rates for Kimmer Ltd. have varied significantly between 2022 and 2021, as this
graph illustrates. There is a noticeable increase in the average time to sell an item, the
average time to pay off a trade debt, the debt to equity ratio, the quick ratio, the current
ratio, and the current ratio. And the others tend to decline.

* Total turnover of assets (times)

The ratio displays the relationship between the average total assets of the company and its
sales revenue. This instrument will enable you to determine whether the business is
utilising its resources effectively. A low change rate indicates that the company's asset
count exceeds its sales volume. The overall asset change increases with the quality of use
of these assets (Yulianti & Kurniawan, 2021).
Compared to 2022, when it is 1.22, the share of total assets turnover in 2021 is 1.36. This
result indicates that the company's product sales efforts are no longer effective.

* Average inventory turnover period (days)

The time it takes to send and distribute items to the market is illustrated by this ratio. The
value of this index is a direct indicator of the company's level of risk. According to Horne
and Wachowicz, an organization's inventory turnover ratio reveals how liquid it is and
how well it controls its stock (Horne and Wachowicz, 1992).
In 2022, the average time to sell an item increased to 115.73 days, a 26.37-day increase
over 2021. This indicates that even while the company's pace of item sales is staying
constant, it is holding onto its stock for extended periods of time. The company's poor
performance is evident from the fact that the number is larger than it was in 2021.

* Average settlement period for trade receivable (days)

This figure reflects the length of time it takes the company to receive overdue payments
from clients. Businesses check this ratio to make sure they have adequate cash on hand to
pay their financial obligations ( Martínez-Solano and García-Teruel, 2008).

This ratio increased from 83 days in 2021 to 96.34 days in 2022 due to Kimmer Ltd.
Every day, the company's bill collection days get longer, increasing the risk to the
company's other financial accounts. To maintain this score under control, businesses need
to employ the appropriate debt reminder techniques.

* Average settlement period for trade payable (days)

This figure illustrates how long it takes a company to pay off its obligations (Richards
and Laughlin, 1980).
The company's trade payables settlement time decreased from 48.6 days to 11.13 days in
2022, a 37.47-day decrease. The fact that the corporation is able to pay off its obligations
more quickly indicates that its financial situation is improving (Richards and Laughlin,
1980).

* Net profit margin (%)

The net profit margin indicates how much money a business makes for each dollar it sells
if it has a net profit. The amount of money that remains after deducting all expenses and
charges, such as taxes, interest, and dividends on preferred stock, is known as net profit
margin, or NPM. A corporation is probably good if its NPM is high (Gitman, 2012).
The net profit margin of Kimmer Ltd decreased by 4.4%, from 19.4% to 15%. This
indicates that compared to last year, the company hasn't been operating as efficiently.
After making $1 in sales in 2021, the company's earnings have decreased by 4.4 cents.

* The percentage of gross profit

This signal indicates the company's profitability and level of competition at a certain
moment. Additionally, it displays the company's earnings at each given period. If this
value is high, the business is operating smoothly; if it is low, it is operating smoothly as
well (Khandafi, 2020).
There is very little change in the gross profit margin from 35.7% in 2021 to 33.87% in
2022. This indicates that there was little change in Kimmer Ltd's profit between 2021 and
2022.

* ROA, or return on assets

Return on assets demonstrates how well management can generate revenue from the
resources at their disposal (Gitman, Joehnnk, and Smart,2011).
In addition, the ROA ratio of the corporation decreased by 8.18 percent in 2022, from
26.4% in 2021 to 18.24%. Investors who see a decline in the ratio as evidence of subpar
performance may find it problematic as the company's ability to generate revenue from
its assets declines.

* ROE, or return on equity

For the common shareholder, who owns the business, return on equity is crucial since it
indicates the management's profit margin on the capital invested by investors after all
other capital providers have been reimbursed (Reilly and Brown, 2012).
For the same period of time, the ROE ratio of Kimmer Ltd. has decreased by 12.65%
(from 41.2% in 2021 to 28.55% in 2022). This indicates that the business is struggling to
attract new investors and raise additional funds from other sources.

* Current ratio (times)

The short-term payment ratio is a metric that indicates a company's ability to fulfill its
short-term obligations (Gitman, 2015).
In just one year, the company's present ratio increased from 5.9 times to 11 times, a
significant increase. This indicates that throughout the previous year, the company's cash
flow has either remained stable or improved. Furthermore, the company's short-term
debts are paid off by its short-term assets.

* Quick ratio (times)

This ratio illustrates how successfully a company can use its most liquid assets to pay its
short-term debt. Additionally, it demonstrates the company's short-term liquidity
(Syahyunan, 2015).
The company's 2021 figure was just 4.1 times this amount. However, in 2022, this figure
rises to 6.71.The figure indicates that the business still has enough cash on hand to pay
off its debts, so it won't need to sell any stock to make good on its promise to pay off any
additional debts.

* Debt-to-equity ratio (times)

This figure indicates the ratio of the company's debt to its wealth. This indicator can be
used by information consumers to determine if a corporation is more dependent on debt
than stock. Businesses having a low debt to stock ratio are unlikely to lose money in a
downturn in the economy, but they also are unlikely to profit in one (Brigham and
Houston, 2011).
The fact that the company's debt-to-equity ratio is less than one indicates that it still has
less debt than equity. However, compared to 2021, this number has increased by 0.29
times in 2022. This increases the likelihood that the business may incur debt, thus it's
critical to consider the potential effects on the business.

* Interest cover ratio (times)

A company can determine how simple it is for them to make interest payments on the
various loans they have. A negative interest coverage ratio is indicative of a company's
inability to pay its interest expenses (Yarba & Güner, 2020).
Figure 7 illustrates how this number peaks in 2021 and then falls off dramatically in
2022, from 35 times in 2021 to just 8.33 times in 2022. This demonstrates that the
amount of interest that can be paid on debt has a limit. Taking the appropriate
measurements is crucial if you want to improve in the upcoming year.

3. Evaluate the performance of Kimmer Ltd. over time.

2022 2021 2020 Industry

average
 Efficiency 1.22 1. 1.65
Total assets turnover (times) 36 2.00
Average inventory turnover 115.73 85
period (days) 89 60
Average settlement period 96.34 80
for trade receivables (days) 83 65
Average settlement period 11.13 45
for trade payables (days) 48.6 45
Profitability Net profit margin (%) 15% 19.4 20.5 20.0
Gross profit margin (%) 33.87% 35.7 36 35.0
ROA (%) 18.24% 26.4 27 27.0
ROE (%) 28.55% 41.2 40.4 40.0
Liquidity and Current ratio (times) 11 5.9 5.5 2
Solvency Quick ratio (times) 6.71 4.1 4.2 1
Debt-to-equity ratio (times) 0.67 0.38 0.4 0.5
Interest cover ratio (times) 8.33 35 30 25

Table 8: Performance of Kimmer Ltd. over time (2022, 2021, 2020)

A company's business outcomes during a three-year period (2020, 2021, and 2022) show
significant differences from the industry average. 2019 and 2020 were better and more
fruitful years for Kimmer Ltd. than 2022 is turning out to be.

All of the 2020 ratios—Net profit margin, Gross profit margin, ROA, and ROE—are
greater than the business average based on the profitability ratio. Beginning in 2021, the
ROE ratio—which stands at 41.2%—is more than the industry average. The company's
ROA and ROE as of 2022 were below the industry average. This indicates that the
business is not highly competitive and that, after 2021, its success would decline.
The ratios of liquidity and solvency have, in one perspective, altered the greatest. Take a
look at the number that decreased somewhat between 2021 and 2022. However, there is
an improvement in 2022, with the majority of the figures exceeding the industry average
(0.67 and 0.5 in the Debt-to-Equity ratio). This is positive since it indicates that Kimmer
Ltd.'s debt has not yet increased beyond its equity. Conversely, the interest cover ratio
fell precipitously and is at only 8.33. In contrast to the industry average of 25, this
number remained high in 2021 and 2020 at 35 and 30, but it fell to 8.33 in 2022, which is
far below the average.
Either way, the company's low total asset turnover relative to the market is a sign of its
poor performance. In just a single year, the average product turnover also increased
significantly. The fact that it takes longer to sell anything now than it did in 2021—89
days versus 115.73 days in 2022—when the industry average is 60 days—indicates that
the sales department has not performed well. While the receivables index is rising, the
payables index is declining.

4.Critically evaluate financial statement to assess organisational performance using

a range of measures and benchmarks
Suggestions on the net and gross profit margins will be made in an effort to improve
KimmerLtd.'s business performance. This will be predicated on the financial statement of
the business. Due to the fact that these two numbers are the most crucial and the only
ones that both internal and external users can utilize.
Net profit margins can be increased in part by increasing net income. Net income will
increase if sales increase and prices decrease. The business can find ways to reduce
expenses in sales, delivery, and storage while maintaining operations by speaking with
both its own suppliers and those of other businesses. The organization also requires a
flexible incentive structure so that Sales and Marketing may work together more
effectively and efficiently to increase sales.
When sales income exceeds cost of items sold, the gross profit margin can be increased.
It is possible to increase the gross profit margin if sales revenue exceeds cost of goods.
The company must control production, product, and other costs if it wants to reduce
overall costs. Uma Foodstuff may consider expanding sales while decreasing the value of
its stock as a means of making financial savings. Thus, the company needs to discuss
reducing the cost of its inputs with its suppliers.

II. SCENARIO 3
1. The monthly cash budget for the last quarter of DEPOT Ltd.

Decembe
October November r
Cash receipt 89000 99000 11900
Cash payment 110800 101800 158800
Purchase 80000 85000 90000
Wages 9800 10800 11800
Overheads 6000 6000 7000
Rent 15000 0 0
Dividends 0 0 20000
Capital expenditures 0 0 30000
Net cashflows -21800 -2800 -39800
Opening balance -10000 -31800 -34600
Ending balance -31800 -34600 -74400

Table 9: Monthly cash budget for the last quarter, 2023 (DEPOTLtd.)

2. The benefits and limitations of budget do for DEPOT Ltd.

Creating a budget is similar to creating a financial strategy for the future operations of
your company. It might be the company's long-term objectives. In order to ensure that it
stays within its budget and generates the greatest revenue feasible going forward, the
company will review its expenditure goals and budget (Jones and Hansen, 2003).

* What makes planning a good concept

Budgeting benefits DEPOT Ltd in a variety of ways. DEPOT Ltd. gains better control
over its finances and a clearer understanding of how much it makes and spends on
expenses such as rent, payments, and purchases by using a systematic budgeting system.
DEPOT Ltd. might then empower decision-makers to establish the appropriate transition
strategy.
These figures may allow the organization to assign tasks to the groups so that everyone is
aware of what has to be done. Creating a budget plan will also assist DEPOT in better
organizing its operations, streamlining its communication, and running its business.
In the event that DEPOT has a deficit, as seen by the October opening and closing
balances of -10,000 and -31,800, respectively), it is imperative to promptly create a
budget in order to assign blame. The adjustments required to raise the company's
performance will be made with the help of the expenditure plan.

* Budgeting has its bounds

Despite these advantages, planning has significant drawbacks. First of all, the figures
above are all only market estimates, thus they are all incorrect. Secondly, this is going too
far and won't be appropriate for some months. As a result, money could be scarce at
times.
Moreover, as departments compete to spend the greatest money, expenditure caps may
lead to conflict between them. Departments and individuals may overestimate their
income and expenses, resulting in budget deficits and decreased earnings for the
company.
Last but not least, budgets only consider results that have an impact on financial matters;
they ignore outcomes that have an impact on other factors. The management of DEPOT
has benefited from the budgets' understanding of cash flow, encompassing income and
expenses. But, they are unable to predict the level of consumer satisfaction or the caliber
of the company's products in the final quarter of 2023.

3. Corrective measures and problem-solving for DEPOT Ltd.

The company's negative net cash flow and opening/ending balance are evident when
examining DEPOT's monthly cash budget for the last quarter of 2023. There is a net cash
flow of -39,800, an opening balance of -34,600, and an ending balance of -74,400.
They're all bad.
At the end of September 2023, a $40,000 bank loan was the root of all the negative
events. According to Zywicki (2011), an overdraft is essentially a high-interest bank loan.
In order to offset losses from not producing enough money to cover all of their costs (Net
cash flows (-39,800$), DEPOT Ltd. borrowed money from the bank. This resulted in a
negative ending balance (-74,4,000$) and went over the company's 100,000$ overdraft
limit. So, these are some suggestions that will assist DEPOT Ltd. in resolving its present
financial issues and maintaining the stability of the company.
- Have a conversation with the buyer and decide to pay for the goods within a month.
- It's crucial to discuss with the supplier the possibility of deferring payment for the
products purchased in October until December because January has an overdraft.
- A large bill in October resulted from paying rent during the first week of the quarter.
For this reason, the business must pay rent at the end of each month.
- Concerning moving from immediate payment for new and upgraded equipment
purchases to an annual payment for equipment rentals. You can save money on capital
expenditures by doing this.

Conclusion
The business's metrics have been calculated, and the budget plan, balance sheet, and
income statement have all been produced by this assignment. Undertake a
comprehensive examination and offer a lucid elucidation of the suggested tactics to attain
maximum operational efficacy for establishments going forward.

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