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  • 1.  CMA Part 2 Avg ratios

    Posted 01-31-2023 03:33 AM
    Hello guys, 

    I am preparing for CMA part 2, In the ratios and analysis section I noticed that many ratios require average of 2 period, like AR turnover, Asset Turnover and etc.. 
    however in some questions the data are given only for 2 Yrs, How can I calculate average of first Year without having the prior year balance ? is there any formula I'm missing ? 

    Many thanks for your support

    ------------------------------
    Hend Alutayri
    Accountant
    Yanbu
    Saudi Arabia
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  • 2.  RE: CMA Part 2 Avg ratios

    Posted 01-31-2023 03:35 AM
    below is an example, they calculate average of first year based on second year balance? can anyone clarify please



    ------------------------------
    Hend Alutayri
    Accountant
    Yanbu
    Saudi Arabia
    ------------------------------



  • 3.  RE: CMA Part 2 Avg ratios

    Posted 02-01-2023 02:21 AM
    Do you use the gleim material 





  • 4.  RE: CMA Part 2 Avg ratios

    Posted 02-01-2023 02:28 AM
    Yes

    ------------------------------
    Hend Alutayri
    Accountant
    Yanbu
    Saudi Arabia
    ------------------------------



  • 5.  RE: CMA Part 2 Avg ratios

    Posted 02-01-2023 03:55 AM

    Dear Hend,

     

    First of all they will not give beginning inventory & Ending inventory both balance for your easy calculation they will always give Only one beginning balance or ending balance you need to consider beginning & ending balance according to carry forward years wise.  

     

    Example if in the question they only give ending inventory for 2 years and ask calculate inventory turn over ration for current year ?

     

                                     

                                     2010                  2011  

     

    Ending inventory     10,000               14,000

     

    Note :

     

    If Ending inventory is given they will ask about current year inventory turn over ration? or

     

    If Beginning Inventory is given then they will ask Prior year inventory turn over ration?  

     

     

    Its very simple you need to just add beginning + Ending inventory & divided by 2 to get average inventory here we consider 10,000 as beginning inventory of 2011 because last year 2010 closing balance will be carry forward as a opening for current year 2011& current year 14000 is consider as Ending inventory Until the next year arrive.

     

    Basically average inventory & average accounts receivable it's a part of formula for inventory turn over ration and accounts receivable turn over ration. When ever they asked this question they will always give 2 years data for One year calculation for average inventory or accounts receivable if they given 3 years they will ask 2 years average inventory.

     

     

    Important thing is here you need to remember the calculation of average inventory or average accounts receivable

    Formula  

     

    Average inventory =  Beginning inventory + Ending  inventory

                                                                                2

     

     

    Average Receivable = Beginning accounts Receivable + Ending accounts receivable 

     

     

     

     

    Thanks & Regards

    Sumair Shaik

    Accountant

    United Arab Emirates

                                                                                 2

     

     

     

     

     

    Sent from Mail for Windows

     






  • 6.  RE: CMA Part 2 Avg ratios

    Posted 02-01-2023 09:19 AM
    Many thanks Mr Sumair, it is very clear now

    ------------------------------
    Hend Alutayri
    Accountant
    Yanbu
    Saudi Arabia
    ------------------------------



  • 7.  RE: CMA Part 2 Avg ratios

    Posted 02-01-2023 02:29 PM
    Hallo Hend

    In this example, prior year beginning balance is 115000 and current year beginning balance is 105000. It means current year beginning balance should be prior year ending balance so average receivable balance as 115000+ 105000÷2


    Thanks
    Nasir 
    Accountant
    Dubai





  • 8.  RE: CMA Part 2 Avg ratios

    Posted 02-01-2023 11:33 PM
    Many Thanks Nasir

    ------------------------------
    Hend Alutayri
    Accountant
    Yanbu
    Saudi Arabia
    ------------------------------