Explain why non-financial information, such as the type shown in appendix 2, is likelyto give a better indication of the likely future success of the business than the financialinformation given in appendix 1 Appendix 1: Financial informationPrevious yearCurrent year945Turnover (£000)900Net profit (£000)187180Average cash balances (£000)Average trade receivables days (industry average 30 days)Inflation rate (%)212018 days22 days33Appendix 2: Balanced Scorecard (extract)Internal business ProcessesCurrent yearPrevious yearError rates in jobs done16 %10%Average job completion time7 weeks10 weeksCustomer knowledgeCurrent yearPrevious yearNumber of customers12201500Average fee levels (£)775600Market share14%20%Learning and GrowthCurrent yearPrevious yearPercentage of revenue from non-core work4%5%Industry average of the proportion of revenue from non-core work inAccounting practices30%25%Employee retention rate60%80%Notes

In any business which runs for-profit, profitability is important vis-a-vis stability, hence a…

urnover (£000) 945 900 let profit (£000) 187 180 verage cash balances (£000) 21 20 verage trade receivables days (industry average 30 days) 18 days 22 days nflation rate (%) 3 ppendix 2: Balanced Scorecard (extract) nternal business Processes Current year Previous year rror rates in jobs done 16 % 10% verage job completion time 7 weeks 10 weeks ustomer knowledge Current year Previous year

urnover (£000) 945 900 let profit (£000) 187 180 verage cash balances (£000) 21 20 verage trade receivables days (industry average 30 days) 18 days 22 days nflation rate (%) 3 ppendix 2: Balanced Scorecard (extract) nternal business Processes Current year Previous year rror rates in jobs done 16 % 10% verage job completion time 7 weeks 10 weeks ustomer knowledge Current year Previous year

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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