2012 Sample...not done :/

[Nima2703]

Hey guys I did the 2011 a couple hours ago and wrote notes on my errors and how to fix them because it always helps me and I haven't done 2012 sample :/ is that really bad? I've read over it and know how to answer most - i thought of printing question 7 and doing that because its long and has the discussion question and also having a go at question 2 for the prepaid? the rest seem easy..is it a good idea to at least go at the ones I'm not 100% about? I only have one paper on my printer made mum buy ink today and dunno where paper is..fail lol cant find any but anyway still respond please and thanks!

[abcdqdxD]

VCAA 2012 sample is not that different to other past exams. Just make sure you know how to do reducing balance, analysis and discussion questions which past practice exams don't have.

[Nima2703]

okay:) i did the discussion question..could anyone mark it if i type it up? :p

[abcdqdxD]

Yeah sure go for it!

[Nima2703]

From 30 September 2012 to 31 December 20120, the stopck turnover rate increased from 85 days to 95 days. (shit wrote that part wrong) This is harmful for the firm's profitability as a lower stock turnover rate indicates less total sales which are the core of a trading firm and directly affect profit. However, from 31 December 2012 to 31 March 2013, the stock turnover rate is expected to decrease to 75 days from 90 days. As a result this should improve the firm's ability to make a profit by boosting its total sales.
Identification: Discounts for cash sales
The owner could implement a discount for cash sales in the business, thereby improving the rate of sales, the stock turnover rate, and in addition, the cash cycle of the business is likely to improve as a result.

thanks

[abcdqdxD]

I haven't looked at the question, but essentially for a stock turnover question:

Stock Turnover measures the average number of days it takes to convert Stock to sales. An unfavourable trend in stock turnover suggests the firm is not managing its stock efficiently. Perhaps the firm is holding excessive levels of stock or has a poor stock mix. A poor stock turnover is unfavourable for liquidity because the firm is taking too long to convert stock to sales, which increases the number of days it takes to convert stock to cash, hence the firm may have trouble meeting its short term debts, such as payments to creditors. Hence the firm may need external sources of finance, such as a loan or capital contribution of cash to alleviate its liquidity problems.

In your answer you should define what stock turnover measures, and implications on liquidity

Stock turnover is not a measure of profitability, but a efficiency/liquidity indicator

But the cash cycle point was spot on

[Nima2703]

It's about impact on profitability :/

[abcdqdxD]

Ok I'll read the question gimme a sec ><

[Nima2703]

i read sample answers and now im shitting myself i forgot about cost of sales debited to stock control and sales returns on debtors also has GST (((

[Nima2703]

and thanks for the reply mate

[abcdqdxD]

Ok sorry.

STO measures average number of days it takes to convert stock to sales.

Two implications for profitability:

1) High STO may indicate an excessive level of stock. This will result in higher storage costs, and stock is more likely to become obselete resulting in stock write downs which will decrease net profit.
2) High STO suggests stock is selling too slowly. This will lead to a low level of sales, reducing profitability. Perhaps more effective advertising is needed.

Strategy:

Better stock management. The owner should seek to discontinue slow moving lines of stock and find an optimal stock mix, and rotate its stock around frequently to maximise sales. The owner should also avoid holding excessively high levels of stock. Hence, improved management of stock  will improve both the STO and profitability of the firm.

[Nima2703]

Thanks you really know your stuff lucky you dont have 6 exams at the same period haha good luck with the 45 in further I hope I get that

[abcdqdxD]

haha thanks hope you do well tomorrow as well

[Nima2703]

Thanks man we'll kill it!! haha cant wait to come back and look at solutions and hopefully be relieved hahaa :p

[BoredSatan]

If you guys are struggling with the indicators, always go back to the formula and think about the top and bottom