Cost Accounting

Classification of cost

 Costing can be calssified based on: By nature or elements (materials, labour and overheads) By time (historical, pre-determined) By traceability to the product (direct, indirect) By association with the product (product, period) By changes in activity or volume (fixed, variable, semi-variable) By function (manufacturing, administrative, selling, research           and development, Read more…

By Anagha Sanil, ago
Finance

Advantages And Limitations Of Break-Even Analysis

Break-even Charts help in: Determining total cost, variable cost and fixed cost at a given level of activity. Finding out break-even output or sales. Understanding the cost, volume, profit relationship. Making inter-firm comparisons. Forcasting profits. Selecting the best product mix. Enforcing cost control. On the negative side, break-even analysis suffers Read more…

By Anagha Sanil, ago
Finance

Contribution

The difference between the selling price or sales and variable cost per unit or total variable cost (or marginal cost) is known as `Contribution’ or `Gross Margin’. It may be considered as some sort of fund from out of which all fixed costs are met. The difference between contribution and Read more…

By Anagha Sanil, ago
Finance

Analysis of profitability

Profitability is a measure of efficiency and control. It indicates the efficiency or effectiveness with which the operations of the business are carried on. Poor operations may result in poor sales and therefore low profits. Low profitability may be due to a lack of control over expenses resulting in low Read more…

By Vishnu S Manoj, ago
Accountancy

Analysis of operational efficiency

 The operational efficiency of an organisation is its ability to utilise the available resources to the maximum extent. Success or failure of a business in the economic sense is judged in relation to expectations, returns on invested capital and objectives of the business concern. There are many techniques available for Read more…

By Anagha Sanil, ago
Finance

Analysis of liqudity position

Liquidity ratios measure a company’s ability to fulfill its short-term obligations and reflect a company’s short-term financial strength / solvency. The term liquidity is described as convertibility of assets ultimately into cash in the course of normal business operations and the maintenance of regular cash flow. A sound liquid position Read more…

By Anagha Sanil, ago
Accountancy

Fixed assets Analysis

 The successful operation of a business generally requires some assets of fixed character. These assets are used primarily in producing goods and in operating the business. With the help of these, raw materials are converted into finished products. Fixed assets are not meant for sale and are kept as a Read more…

By Anagha Sanil, ago
Accountancy

Capital structure or leverage ratios

 Financial strength indicates the soundness of the financial resources of an organisation to perform its operations in the long run. The parties associated with the organisation are interested in knowing the financial strength of the organisation. Financial strength is directly associated with the operational ability of the organisation and its Read more…

By Anagha Sanil, ago
Accountancy

Tools for Financial Analysis

 The following are the important tools of financial analysis which can be appropriately used by the financial analysts: Common-size financial statements Comparative financial statements Trend percentages Ratio analysis Funds Flow analysis Cash Flow analysis Common-size Financial Statements: In this type of statements figures in the original financial statements are converted Read more…

By Anagha Sanil, ago