Doubtful accounts?

[Kinlejus]

Good day Dear fellow accounting enthusiasts

I am asked to analyse the financial performance of the retail company and provide the report to the management.
One thing I am not sure what to do about is that ''a third of the sales are on credit, and all the stock is bought on credit''.

I am provided with income statement and balance sheet.
Do I divide the sales figure on income statement by 3, and after that I need to calculate the doubtful debt and/or allowances for return? What else can I incorporate to my analysis knowing that a third of sales are on credit and all the stock is bought on credit?

Thanks for any input!

 

[Fidget]

Sounds more to me that that part of your assignment is steering you towards looking at debtors and creditors days ie do the ratios that give the average number of days it takes debtors to pay, and similarly, the average number of days the business takes to pay its suppliers.

Once done, you can draw some conclusions.

Ideally, debtors days should be less than creditors days which means money is coming in from customers for the company to comfortably pay its suppliers.

If it's the other way round, then it's going to cause cash flow problems. Could be that the company's credit checks of customers isn't very good, so they end up taking longer to pay, if at all. Perhaps the company isn't taking full advantage of credit terms with its suppliers and paying them earlier than it needs to, or maybe its buying in more stock than it can sell.

Just some ideas for you.

 

[Kinlejus]

I kindly appreciate Your thoughts, Fidget, now I will go on and do the ratios as You suggested.
Will keep updating as of how it goes

 

[Counterofbeans]

Do I divide the sales figure on income statement by 3, and after that I need to calculate the doubtful debt and/or allowances for return?

No. Based on what you've posted, you can't conclude much of anything.

What else can I incorporate to my analysis knowing that a third of sales are on credit and all the stock is bought on credit?

Thanks for any input!

Based on the information provided, not much...

The main question is this: What is this report to management supposed to provide?

 

[Kinlejus]

No. Based on what you've posted, you can't conclude much of anything.



Based on the information provided, not much...

The main question is this: What is this report to management supposed to provide?

Sorry for taking long to reply
The report is supposed to analyze financial health of the company using financial ratios, which then will be handed to the board of directors.
I have one question regarding the cash flow statement, cash figures do not match, and I believe that is because of the taxation.

Do I post what I've calculated, and what does not balance, here?

Thanks!