LIQUIDITY RATIOSĬurrent Ratio = Current Assets/Current Liabilities These ratios are used to determine how much working capital a business holds and if it’s too much, or if there is a risk of the business not being liquid enough. While the objective tests and specifically the F1 Financial Reporting paper you will be required to perform quick calculations and select the right answer. These are the kind of questions and thought process you should be going through during a case study exam. It’s more feasible for a company to focus on extending payment terms and improving cash collection rather than looking at the production or inventory process. Inventory Days – how long is the company holding onto inventory for, can sales be generated more efficiently and can the production process be quicker?.Receivable Days – is cash being collected on time? If not, what are the issues? Improving cash collection and reducing this blue arrow would help shorten the working capital cycle.
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Payable Days – is the company making full use of payment terms? This blue arrow could be pushed further out to shorten the working capital cycle.The focus will be on the green arrow – how can companies positively impact this cycle? Here is an illustration of The Working Capital Cycle. The shorter this cycle is, the more efficient the company is run and the quick it can start the process again. It’s the length of time between paying suppliers for the purchase of raw materials and receiving cash back into the business when the customer pays our invoice. It can tell you if there is an issue with how long it takes to collect cash, are they not utilizing payment terms effectively and do they hold too much inventory? Many companies will measure the working capital cycle to identify any areas of concern with how the company invests it’s cash. Perhaps the best way to approach this subject to start from the end and break it down step by step. It’s a simple formula that tells you how liquid the company is. Working Capital = Current Assets – Current Liabilities Working capital is a measure of the company’s liquidity and is calculated by deducting the current liabilities (trade payables, overdraft etc.) from the current assets (inventory, cash and receivables). The area I want to focus on here is section D on the F1 syllabus: Managing Cash and Working Capital as it’s an area that can be tested heavily in both the objective tests and the case study at operational level. Regulatory environment of financial reporting If you should fear anything at this level it should be the P1 paper which had a very modest 54%.Ī. The CIMA F1 paper had a 79% pass rate, while the E1 paper (which is considered one of the easier papers) had an 81% pass rate. Then fear not.Ī quick glance at the CIMA Exam Pass Rates during 2020 paint a happy picture.
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If you are one of the those students that are immediately filled with dread when opening your F1 Financial Reporting textbook (or pdf online text as is the case these days). But the fundamentals and principles remain the same. Nevertheless, I did manage a first time pass with the F1 Financial Reporting paper, although this was back around 2014 when the exams were not computer based and the questions were in longer format.
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Fearing that I would never be able to remember and apply them on exam day. I remember myself when studying for this paper I dreaded the accounting standards and technical elements of the paper.
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Bookman Rowman & Littlefield Education 2004 human resources engineering job real resume anne mckinney prep publishing dictionary banking encyclopedy finance international Jae K.The CIMA F1 Financial Reporting exam is not as tough as many students fear. Morrisey 2008 Brian Knittel chm Que repairing Scott Mueller Aleksandra S.
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