Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the Enterpriseturnover ratioBy looking at Table 5.6 it can be seen that just like for the current asset ratio thetotal asset turnover ratio is higher particularly in the second half of the year, because thenet turnover of the enterprise is higher at that time. All assets of the enterprise are turnedover at least two times during a year.Rate of turnover of accounts receivableFor the purposes of assessing this ratio the formula for calculation of the rate ofturnover of accounts receivable 4.19 is used. In order to estimate the rate of turnover ofaccounts receivable the average amount of debtors’ debts as well as the figure of netturnover must be known for each period, which must be adjusted, for example, the netturnover figure for Quarter 1 has to be multiplied by 4, the net turnover figure for Quarter 2– by 2, the net turnover figure for Quarter 3 has to be divided by 3 and multiplied by 4,while no adjustment has to be made to the net turnover figure of Quarter 4.To find out the number of days for turning over the accounts receivable, thenumber of days in a year must be divided by the rate of turnover of accounts receivable(see Table 5.7).Table 5.7Estimate of the Enterprise N rate of turnover of accounts receivable for theperiod from 31/03/2XX8 to 31/12/2XX9 (in CU)March,2XX8June,2XX8Sept.,2XX8Dec.,2XX8March,2XX9June,2XX9Sept.,2XX9Dec.,2XX9Net turnover 150 046 347 023 723 868 1074683 243 435 533 788 846 876 1166073Adjusted netturnover 600184 694046 965157 1074683 973740 1067576 1129168 1166073Accountsreceivable 99 150 111 292 167 202 207 862 289 186 219 634 195 662 170 200Average value ofaccounts receivable 97921 105221 139247 187532 248524 254410 207648 182931Rate of turnover ofaccounts receivable 6,13 6,60 6,93 5,73 3,92 4,20 5,44 6,37Length ofturnover ofaccounts receivablein days 60 55 53 64 93 87 67 57When looking at Table 5.7 ‘Estimate of the Enterprise N rate of turnover ofaccounts receivable for the period from 31/03/2XX8 to 31/12/2XX9’ it can be noticed thatthere is a considerable decrease in the rate of turnover of accounts receivable during theperiod when the net turnover figure of the enterprise is among the lowest. The reason forthis is that overdue debtors’ debts constitute one third of the total amount of accountsreceivable, the delay exceeding 120 days and their collection has become problematic.During the period, when the turnover of the enterprise is decreasing, the amount ofaccounts payable decreases too. The smaller the amount of accounts receivable, the higheris the percentage of the difficult debtors’ debts from the total accounts receivable.98
Analysis of the Operation and Financial Condition of the EnterpriseAccounts receivable will be discussed in more detail under the management of accountsreceivable section.It is also necessary to consider the rate of turnover of accounts payable and tocompare it then with the rate of turnover of accounts receivable.Rate of turnover of accounts payableFor the purposes of assessing this ratio the formula for calculation of the rate ofturnover of accounts payable 4.21 is used. In order to estimate the rate of turnover ofaccounts payable the average amount of creditors’ debts as well as the figure of netturnover must be known for each period, which must be adjusted, for example, the netturnover figure for Quarter 1 has to be multiplied by 4, the net turnover figure for Quarter 2– by 2, the net turnover figure for Quarter 3 has to be divided by 3 and multiplied by 4,while no adjustment has to be made to the net turnover figure of Quarter 4. To find out thenumber of days for turning over the accounts payable amount, the number of days of oneyear must be divided by the rate of turnover of accounts payable (see Table 5.8).Table 5.8Estimate of the Enterprise N rate of turnover of accounts payable for theperiod from 31/03/2XX8 to 31/12/2XX9 (in CU)March, 2XX8June,2XX8Sept.,2XX8Dec.,2XX8March, 2XX9June,2XX9Sept.,2XX9Dec.,2XX91166073Net turnover 150046 347023 723868 1074683 243435 533788 846876Adjusted net116607turnover 600184 694046 965157 1074683 973740 1067576 1129168 3Accountspayable 217224 315697 296244 327454 470252 545623 477655 418595Average value ofaccountsreceivable 204833 266461 305971 311849 398853 507938 511639 448125Rate of turnoverof accountspayable 2,93 2,60 3,15 3,45 2,44 2,10 2,21 2,60Turnover ofaccountspayable in days 125 140 116 106 150 174 165 140When looking at Table 5.8 ‘Estimate of the Enterprise N rate of turnover ofaccounts payable for the period from 31/03/2XX8 to 31/12/2XX9’ it can be noticed thatthe slowest rate of turnover of accounts payable is attributable to those periods in whichthe most active operations take place in the enterprise, because during that time the amountof creditors’ debts is going up, while the amount of cash does not change considerablyfrom that.Comparing the turnover data of accounts receivable and accounts payable duringthe period of time from 31/12/2XX7 till 31/12/2XX9, it can be seen accounts receivable in99
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