Accounting - How changes to the numerator and the denominator impacts on
the ratio
How changes to the numerator and the denominator impacts on the ratio
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Each of the ratios stated above has a numerator and a denominator. For
example: Net profit/(average) Total assets. The net profit is the numerator
and the total assets the denominator. The ratio will be improved by
increasing net profit at a faster rate than total assets or decreasing net
profit at a slower rate.
When discussing a change in a ratio you should:
* measure the ratio
* show how it was calculated
* explain the changes to the numerator and denominator that caused the
ratio to change
Looking at key items in the ratios in the tables above.
Net profit
May be increased by (for decreases reverse the increase/decrease below)
* an increase in sales
* a decrease in price, which may stimulate extra demand
* an improved location
* increased spending on advertising and sales wages
Advertising
* better quality
* more appropriate
* increased spending
Product
* quality
* type
* range
Customer focus
* after sales services
* pre sales service
* extra services such as training
Cost of goods sold
buying in bulk - a decrease in buying costs, an increase in carrying costs
cheaper items, risk of sacrificing quality
more expensive items may have greater appeal leading to increased sales
the margin between the cost price and the selling price is an important
factor in the success of a business
Expenses
increased efficiency should be sought in use of expenses
all expenses should be linked to the contribution they make to profit
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How do changes to the numerator and the denominator have impacts on the ratio?
Educating...
This course has clearly illustrated about impacts of business activities. It has precisely presented through different terms for finding out ratio of each important activity.
how to measure your ration
Accounting -> How changes to the numerator and the denominator impacts on the ratio How changes to the numerator and the denominator impacts on the ratio Each of the ratios stated above has a numerator and a denominator. For example: Net profit/(average) Total assets. The net profit is the numerator and the total assets the denominator. The ratio will be improved by increasing net profit at a faster rate than total assets or decreasing net profit at a slower rate. When discussing a change in a ratio you should: measure the ratio show how it was calculated explain the changes to the numerator and denominator that caused the ratio to change Looking at key items in the ratios in the tables above. Net profit May be increased by (for decreases reverse the increase/decrease below) an increase in sales a decrease in price, which may stimulate extra demand an improved location increased spending on advertising and sales wages Advertising better quality more appropriate increased spending Product quality type range Customer focus after sales services pre sales service extra services such as training Cost of goods sold buying in bulk - a decrease in buying costs, an increase in carrying costs cheaper items, risk of sacrificing quality more expensive items may have greater appeal leading to increased sales the margin between the cost price and the selling price is an important factor in the success of a business Expenses increased efficiency should be sought in use of expenses all expenses should be linked to the contribution they make to profit
This course has clearly illustrated about impacts of business activities. It has precisely presented through different terms for finding out ratio of each important activity.
great
How do changes to the numerator and denominator impact ratio?
The net profit is the numerator and the total assets the denominator. The ratio will be improved by increasing net profit at a faster rate than total assets or decreasing net profit at a slower rate.
course is just too satisfactory.How to put in place changes in ratios (numerators and denominators)well explained.