Interpreting Accounting Information for Decision Making System

Question: Discuss about the Interpreting Accounting Information for Decision Making System. Answer: Introduction: In the month of December 2016, all the financial transactions of the company have been recorded. Evaluation of the profitability achieved by the company is the objective of preparing the report. The company have been involved in selling three products and the profits is analyzed for all the types of products. The objective of the report is to provide an appropriate recommendation to the management of the company by analyzing the profits generated from different products (Demski, 2013). Analyzing the financials of the company is the main aim and the analysis is done using the statement of profit and loss. Various types of the financial transactions associated with the business is also analyzed. Report also analyses the financials of the company using ratio calculation and this comprise of the liquidity ratio and profitability ratio (Reimers, 2014). Evaluating Splash performance for December 2016: It is clearly depicted from the report presented that the management of the company has disclosed the financial performance of the company concerning the previous year. Three aspect have been chosen in order to gain the increased understanding of the research. These three aspect comprise of train, race and many more. According to the demand of market, all the three aspects have ample returns and distinct selling quantities (Collier, 2015). It is shown in the table below: Profit and loss statement summarizes all the types of expenses, revenues and cost incurred during the particular financial year. It is known by different names and most of the losses incurred and gains received by the organization are included in the profit and loss statement (Demyanenko Rozhelyuk, 2016). Return on equity and net profit margin are some of the ratios demonstrated under the profitability ratio. ROE= (1193.30/61193.30)= 1.95% Balance sheet what does it do and what is your analysis? Provide ratios. Balance sheet is the financial statement of the company, which summarizes the liabilities, asset and the shareholders equity at the particular point of time (Romney et al., 2013). It gives an idea to the investors about the amount invested by the company and the amount, which the company owes to others. Liquidity ratio is the main ratio taken into consideration. Current ratio is obtained by dividing current assets by current liabilities. CA= 4116+ 3672+4664+102152.44= 114604.44 CL= 400+ 34210= 34610 Whereas CA stands for Current assets and CL stands for current liabilities CR = 114604.44/ 34610 = 3.311 Whereas CR stands for Current Ratio The accounts transaction is terms of the application of the various types of the balances concerning accounts. They are directly related to the balances such as the total equity maintained, net profits and revenues earned by company. The application of the account of balances such as maintenance of such balance at banks and inventories (Quan et al., 2013). Concerning the liabilities, there are different types or say category of liabilities, which the company owes. There are association of various types of accounts, which is viewed to have the account payable. It include the account such as the account payable. There are different types of the accounts such as account that are payable to the accounts, which is used to view the accounts receivable. The amount of the accounts payable comes to 14663. The total valuation of the inventory comes to 3672. For race it stands at 4664 and for the train, the value stands at 4116. Recommendations It is observed that the net profit margin has declined and three types of gross rates were discovered. The recommendation offered by the analyst is about boosting the company efficiency by considering the below listed factors. It has been observed by train that the gross margin of the company in the previous year stands at 19.32%. In this regard, it is required on part of managers to prepare the strategy, which contributes in decreasing the cost of sales. This will help in dealing with the offerings of the gross profit of the company. Under the race product range, it was observed that the sales percentage of the company has increased. Therefore, under this product, the company needs to be efficient in manufacturing this product. It should avoid investing in two or more product range. Cost of sales and the production cost are included in the direct expenses. The cost of sales needs to be decreased over the financial year so that the company can experience increased profit margin rate. In the recent ear, the company has been experiencing liquidity position that is highly efficient. On this part, it is recommended to reduce the collection period of the debtors as it would help in lowering the bad debts and help in generating the increased amount of profit in short time span. Enhancing the sales would help in maintaining the constant development by increasing the efficiency. It is recommended to the operation managers to imbibe the process of production with highly efficient techniques. This will help the company in increasing the quantity of the goods sold. Additional reports suggested: Certain reports are to be prepared by the company as a part of advice. Statement of cash flow- it will be easy on the part of company to analyze the flow of cash into or out of the business by preparing the cash flow. Decisions should also be taken for the management of the future cash flow. Report on Gross margin based on product- the preparation of the gross margin report would indicate the gross margin of the entire product. It will help the company to segregate the products that are profitable to the company. Income statement that are changeable- the presentation of the report of the income statement will help in facilitating the company in realizing increasing or decreasing sales impact and the variability in the margin on the basis of net profit. Profitability based on segment- It is observed that the operations of the business of the company is segregated into three segments. The segment should be prepared because of the profitability report. This will help the business in realizing the business units, which are profitable. Conclusion: From the above analysis, it is concluded that compared to the selected two offering, the sales of train is at the highest level. The gross profit of the company is lower and for the offerings of the company, the cost of sales is at the top position. On the other hand, the competition of sales in the race product range as compared to other product has performed efficiently in sales. This is reason that the train has less cost of sales with higher gross profit margin. The sales amount of the race is lowered and the decreased cost of sales stands at $ 476. The fallen amount of sales has been attributable to the increased gross profit. The increased value of the gross profit stands at 73.84%. It is observed that the company would be able to attain huge amount of gross profit margin if there is decline in the amount of sales rather than the reduced cost of sales. Train has the highest variation in the sales and the sales cost as compared to the rate of return in the form of gross profit. Attainment of 73.84% gross profit has also reduced the difference for Race. Reference: Collier, P. M. (2015).Accounting for managers: Interpreting accounting information for decision making. John Wiley Sons. Demski, J. 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