Ways To Increase Return On Assets Essay Example | Topics and Well Written Essays - 2000 words

Ways To Increase deliver On Assets - Essay ExampleSince both sets of figures show similarity in the total expenses at 15,400 each, although bent B fails to present the break down of the expenses, then using the said expenses as criterion could non be deemed to indicate a material difference for purposes of inferring which of the devil would or would not show a true and fair value. It is, therefore, the matter of the gag law stock that will settle the issue of which set does or does not present a true and fair view since it is in the value of the closing where the two sets of figures materially differ. By taking the difference of 14,000 and 10,000, one will get a difference of 4,000 which represents somewhat 40% and which could be now considered by auditors as material misstatement in the financial statement. As to why it collide withs materially the financial statements will be seen in the income statement and the counterbalance sheet. The income statement is affected because closing stock or inventory takes the nature of revenues in the income statement as will be explained later. The balance sheet is also affected because the closing stock is part of the current assets and total assets which are separate the computation of liquidity using current ratio and the profitability using the return on assets. Since it affects the gain income, the other ratios where net income is used will also be affected.As to how the material misstatement will affect the profitability ratios may be illustrated as follows First, the closing stock is important in the computation of piggy profit ratio (GPR) which is computed by dividing gross profit by the total sales. It must be renowned that the closing stock affects the value of the cost of sales to be deducted from total sales to arrive at the gross profit.