MANAC PLC

Manac plc



Manac plc

Manac plc, which produces and sells a range of standard electrical goods. Production and sales take place across a number of countries. The Manac plc uses standard costing and absorption costing as part of its approach to strategic management accounting.

Industry benchmark averages affect a Manac plc's financial structure

For the sake of simplicity, this article will focus on sales forecasts. For similar details about the stock market value/price forecast, write or fax the authors.

The analysis is restricted to basic accounting variables, such as sales, stocks, creditors, and current assets. The sample covers about 2,000 companies in the UK. The results show that the departure from proportionality that is observed is primarily attributable to sector and size(Popovich 2006 ). For the ratio that is studied, current assets to current liabilities, the ratio for larger firms tends toward an overall norm for the economy. The results do not support the hypothesis of proportionality but indicate that inferences about an average-size Manac plc's financial structure may be drawn directly from the financial ratio by comparing it with an industry benchmark. We are basing our own study on these proven findings.

Apply industry financial ratios to forecast individual companies

This analysis provides basic information for simple comparison of a few key financial ratios(Wright 2007 ). Financial ratio analysis is used extensively in evaluating a Manac plc's performance by credit lenders, credit rating agencies, investors, and management. Ratios for a particular Manac plc are compared to an industry average to determine the relative success or failure of the firm.

Return of total investment is considered to be a key ratio in measuring a Manac plc's performance. Short-term liquidity is best measured by the acid test ratio and the current or working capital ratio. Long-term solvency is best appraised by comparing a Manac plc's amount of debt as a percentage of stockholder's funds(Bakar 2005 ). A ratio that shows a Manac plc's ability to service debt is the interest coverage ratio. Other important measurements include the average profit margin, sales to capital, stock turnover, and debtor's turnover.

This analysis also compares the financial performance of 45 UK industries. The frequency distributions are compiled from a representative sample of 700 UK firms, based on the 1977 accounting reports for those firms. We are applying similar procedures to US, instead of UK companies and industries, and expect similar findings. We have adopted similar concepts of financial ratios, acid tests, return on investment, current ratio and many industries performance evaluations.

Representative ratio depicts an entire ratio factor (many ratios)

An examination is made of financial ratios within the context of a single, homogeneous industry(Wolfe 2007 ). The findings furnish some insight into the validity of using single-industry ratio averages as standards to evaluate individual firm performance. Factor analysis determines whether these ratios group in the traditional category of ratios as suggested in the financial statement analysis literature.

This was followed by a cluster analysis of the composite ratios to determine stable statistical grouping of firms developed over time within the industry(Sampselle 2006 ...