Although modified accounts are more open to interpretation errors, there is still a great deal of information which
can be extracted. For example, all companies are required to file a balance sheet providing the figures necessary
to calculate a firm's current ratio, quick ratio, debt ratio and two trend charts.
Companies filing modified accounts are not required to file a turnover figure. However, it is possible to calculate
an approximate turnover figure using the following ratios. The stock turnover ratio can be very accurate when
reviewing wholesale industries. The fixed asset turnover ratio can be very accurate when reviewing manufacturing
industries. The debtor turnover ratio can be very accurate when reviewing contracting industries, particularly local
government agencies. Ratio analysis is not an exact method and you will need to use your judgement when
choosing the best ratio to use. Example calculations are provided below for each ratio. Annual figures for Industry
Averages can be found on page three in the Executive Summary. Annual figures for stock, total fixed assets and
debtors for respective companies can be found in Chapter Five.
Approximate Turnover for 2008 for Widget Limited
= Industry Average Stock Turnover for 2008 x Stock for 2008 for Widget Limited
Approximate Turnover for 2008 for Widget Limited
= Industry Average Fixed Asset Turnover for 2008 x Total Fixed Assets for 2008 for Widget Limited
Approximate Turnover for 2008 for Widget Limited
= Industry Average Debtor Turnover for 2008 x Debtors for 2008 for Widget Limited
The stability of these ratios is stated in the Executive Summary. This should indicate the degree of confidence
that is safe to apply to your approximate turnover figures.
Chapter Five: Terms & Ratios
We have always found it useful to provide our readers with a chapter explaining the terminology and formulas as
we have used them in our review. For the reader to better understand the data and analyses provided throughout
the review, it is useful to know how the various terms and ratios have been applied.
Chapter Two Introduction | 15
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56