Category / Ratios

by Edgar

F1, F2 and F3 Changes due in Dec 2011 Exams

orange juice from Bali

There will be changes to almost all exam papers effective Dec 2011 exams.

That would mean you have 2 paper-based tries based on current exam format left before the change.

So what are the changes due for F1, F2 and F3?
In short, the exam format will change from a pure multiple choice question (MCQ) format to a combination of MCQ and short questions basis format.

Paper F1, Accounting in Business
Section A – 16 x one-mark short objective test and 30 x two-mark short test questions.
Section B – 6 x four-mark longer version objective questions with one taken from each objective test questions of the six sections of the syllabus.

Paper F2, Management Accounting
Section A – 35 x two-mark short objective test questions
Section B – 3 x 10-mark longer version objective test questions – one taken from each of the budgeting, standard costing and performance measurement sections of the syllabus.

Paper F3, Financial Accounting
Section A – 35 x two-mark short objective test questions
Section B – 2 x 15 mark longer version objective test questions with one question based on group accounts and the other on preparation of financial statements (which may include an element of interpretation of accounts)
[Edgar says it looks like old topics will be re-introduced to the syllabus.]

Source – ACCA

by Edgar

Return on Equity & Creditors’ Turnover in days

P/S – This is my feel.

Hi,

Just completed my lecture on financial ratios & interpretations recently. Two stories related to the topic were sent to me. I wish to share them with you.

The first story from Paul. He said,
“Hi Edgar, I thought this was particularly relevant to what you have mentioned in your last class with regards to inventory ratios. Interesting to relate this to everyday news, especially in Singapore context. Paul”

Paul cited Daniel Buenas’s report that most S’pore companies are tardy paymasters and are worse paymasters than companies in China, Australia, Hong Kong and Taiwan. 52 per cent consistently late with their payments from a study done on 1,000 firms from 6 countries by Dun and Bradstreet (D&B).

Only 33 per cent of companies here were ‘prompt’ in their payments, which is defined as ‘consistently paying within the credit terms given to a business’.

The second story in today’s Busines Times said Singapore firms are among the Asia-Pacific region’s top companies by return on equity (ROE). This is according to a Dun & Bradstreet’s (D&B) study released yesterday.

Of the 1,000 companies ranked in the study, Singapore firms ie. Starhub Mobile and APL, Neptune Orient Lines’s subsidiary, took second and fourth places respectively.

StarHub Mobile recorded an ROE of 1,019.3 per cent. The fourth placed Neptune Orient Lines subsidiary APL achieved a 935.2 per cent ROE.

Wow! Amazing….

by Edgar

A New Ratio from Manchester Business School

Hi friends,

Attended a taster seminar by Mr Bob Ryan of Manchester Business School.

Interestingly he is rumoured to be the examiner for ACCA’s new financial management paper. After listening to him for 2 hours, I wish “All the Best” to those taking that paper :)…

Back to the topic proper.

What is the issue?
When companies are required to show aggressive numbers, creative accounting (hei! actually some are not so creative after all) becomes the order of the day. Companies like Enron, ACCS and Informatics are at various stages of proving their respective revenue recognition being true.

Is there a magic panacea to detect this problem before it explodes and takes the savings of thousands of good hardworking people and places thousands of people out of work?

The ultimate test of a true revenue is whether that revenue is convertible to “CASH”.

The question an investor, a good CEO, a good CFO should asked is whether the Operating Cash Flow (OCF) commensurates with the rapidly growing Operating Profit (OP). If OP had grown by 300% while OCF grew by a meagre 2%, one should ask where had the OP gone to?

The Panacea
The panacea as proposed by Mr Bob Ryan required us to calculate the COP, Cash to Operating Profit ratio.

COP = EBITDA / OCF

The steady state would be COP = 1 where a $1 of EBITDA would translate to $1 of OCF.

Mr Bob Ryan said the ratio would have detected a severe dislocation in ENRON given its COP of 19!!!!!!

Tired and sleepy.. pardon me for any typo and factual disjointment..
Good night and take care.