diploma in management & leadership level 5 week- 1 lesson 1 session 1 financial control
DESCRIPTION
Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control. By Anjum Sattar Email [email protected]. Water Only. Aims and Objectives. Aim (s) Introduction to working capital Management Explanation of ratios analysis Objective(s ) - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/1.jpg)
Diploma in Management & Leadership Level 5
Week- 1 Lesson 1 Session 1Financial Control
By Anjum Sattar
Email [email protected]
Apr
21,
202
3
Water Only
1
![Page 2: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/2.jpg)
Aims and Objectives.
Aim (s) •Introduction to working capital Management•Explanation of ratios analysis
Objective(s )Learner will be able to….
•Define what is meant by working capital management.•Explain types of ratios
Apr
21,
202
3
2
![Page 3: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/3.jpg)
Background Knowledge• What do we know about Financial control
Apr
21,
202
3
3
![Page 4: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/4.jpg)
Working Capital Management
Working capital is the capital available for conducting the day –to-day operations of an organization; normally the excess of current assets over current liabilities.Working capital management is the management of all aspects of both current assets and current liabilities, to minimise the risk of insolvency while maximising the return on assets. Source :- F9(ACCA book of FTC)
.
Apr
21,
202
3
4
![Page 5: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/5.jpg)
Working Capital
Apr
21,
202
3
5
•Working capital is how much in liquid assets that a company has on hand. Working capital is needed to pay for planned and unexpected expenses, meet the short-term obligations of the business, and to build the business.• A lack of working capital makes it hard to
attract investors or to get business loans or obtain credit.
![Page 6: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/6.jpg)
Working Capital Formula
Apr
21,
202
3
6
![Page 7: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/7.jpg)
Current Assets and Current Liabilities • The net working capital of a business is its current assets less
its current liabilitiesCurrent Assets include: Stocks of raw materials (inventory)Work-in-progress Finished goodsTrade debtors ( Account receivables)PrepaymentsCash balancesCurrent Liabilities include: Trade creditors( account payables) AccrualsTaxation payable Dividends payable Short term loans
Apr
21,
202
3
7
![Page 8: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/8.jpg)
Working Capital Ratios
Apr
21,
202
3
8
• Two types of ratio under working capital, Liquidity ratios, operating cycle ratios.
• Liquidity ratios
• Current ratio= Current assts/ current liabilities
• Quick ratio( acid test)= Current assets-inventory/current liabilities
![Page 9: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/9.jpg)
Statements of Financial Position
Apr
21,
202
3
9
![Page 10: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/10.jpg)
Income statements for year 30 June
Apr
21,
202
3
10
![Page 11: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/11.jpg)
Liquid ratios for 2010
Apr
21,
202
3
11
• Current ratio:
74/46 = 1.6
The Quick ( or acid test ratio):
72-42 /46 = 0.7
![Page 12: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/12.jpg)
Activity 1
Apr
21,
202
3
12
• Calculate current and quick ratio for year 2011. Through using cheat sheet.
![Page 13: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/13.jpg)
Operating cycle ratio’s
Apr 21, 2023
13
• The cash operating cycle is the length of time between the company’s outlay on raw materials, wages and other expenditures and the inflow of cash from the sales of goods.
• The faster a firm can push items around the cycle the lower its investment in working capital will be
• The periods used to determine the cash operating cycle are calculated by using a series of working capital ratios.
• Account turnover ratio in days Account receivables / credit sales x 365
• 29000/ 209000 x365 = 50.6 days or 51 days. • Inventory turnover ratio in days • Average inventory/cost of good sold x 365 • (1/2( 37 +42) x365/ 157 = 92 days
![Page 14: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/14.jpg)
Activity 2
By using cheat sheet of year 2010 calculate
Account receivable turnover in days
Inventory turnover in days
Apr 21, 2023
14
![Page 15: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/15.jpg)
Apr
21,
202
3
15
Operating cycle ratios
Formula Year 2010 Year 2011
Account turnover ratio in days
Account receivables / credit sales x 365
29000/ 209000 x365 = 50.6 days or 51 days.
Inventory turnover ratio
Average inventory/cost of good sold x 365
(1/2( 37 +42) x365/ 157 = 92 days
![Page 16: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/16.jpg)
Working capital
Apr 21, 2023
16
![Page 17: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/17.jpg)
Useful resource to enhance understanding in Working capital management
www.opentuition.comwww.accaglobal.comCMI website Youtube.com / F9 ACCAWikispaces.com / bradrc www.cima.com
Apr
21,
202
3
17
![Page 18: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/18.jpg)
Reference books • Koontz Harold and Heinz Weihrich (1990) Essentials of
Management fifth edition page 392,46,47,5 Published by McGraw-Hill , Inc .
• Financial Control CMI Unit 5007 book • ACCA F9 paper book Financial Management FTC , BPP. • Financial Management 10th edition by Van Horn Published by
McGraw-Hill , Inc .
Apr
21,
202
3
18
![Page 19: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/19.jpg)
Apr
21,
202
3
• Working capital
Summary . Q & A
19
![Page 20: Diploma in Management & Leadership Level 5 Week- 1 Lesson 1 Session 1 Financial Control](https://reader035.vdocument.in/reader035/viewer/2022062519/568150ba550346895dbed59a/html5/thumbnails/20.jpg)
Apr
21,
202
3
Next Session.
In Next Session we are going to Learn ……
•Remaining ratios analysis / project appraisal
Tuesday 07/08/2012 09:30 – 1230 20