Tuesday, October 16, 2012

WHEN YOUR CHILD FALLS ILL IN SCHOOL



When your child falls ill in school…

By Harold Ayodo
When a student becomes ill or suffers an injury, which between the parent and school is responsible for ensuring they get proper treatment and pays medical bill?
Even though all students get sick at some point, few parents and guardians give much thought to whether their children can access quality medical care, especially during an emergency, in school.
Some realise they should have been more concerned about their child’s medical welfare when it is too late. This was true in the case of Mrs Karin Rapp, the programme director of the Youth Sponsorship Programme, an organisation that offers bursaries and support to needy, bright students in public secondary schools. She was confident that the medical needs of the students were covered by medical fees, one of the items in tuition fees. Besides, the Government allocates Sh300 to every student for medical costs through the subsidised secondary education programme. Many schools charge additional money ranging from Sh100 to Sh500. "The money cannot even treat malaria," says Bondo’s Majiwa Secondary School principal Dick Owade.
Hospital
So when the principal of a national school called to inform Rapp that a Form Four student supported by the programme was sick, she immediately picked her up and took her to St Mary’s Hospital.
At the private hospital in Lang’ata doctors told her the students had to undergo surgery. "I paid the bill of Sh19, 000 expecting a refund from the school since I had paid an insurance fee of Sh1, 290 and Sh370 medical fees," she says. Two years later, the school is yet to reimburse her, despite several oral and written communications with the school.
Last month a face-off over medical bills pitted Githunguri Girls High School and a parent of a Form Three student. Lydia Nyambura got burnt when she fell in boiling tea in the school kitchen and was rushed to hospital by staff. She was scalded on the right hand, chest, stomach and thighs and admitted to a private hospital in Thika from February 24 to March 22 incurring a bill of over Sh47,000.
Recounting her ordeal to The Standard from her hospital bed, Nyambura said she went to fetch hot water when the accident happened.
Nyambura healed but a confrontation ensued between her mother, Ms Catherine Micere, and the school over who should settle the bill.
Ms Beth Githaiga, the principal, says the parent should pay the bill.
"Each student pays a medical fee of Sh100 per year, which only caters for outpatient services," Githaiga told The Standard.
What the two cases highlight is that there are no clear guidelines for schools on how to deal with students’ medical care and emergencies.
The common practice in many schools, including boarding ones, is that when a student is sick they are prescribed for bed rest and given painkillers and other over the counter drugs by the school nurse with the hope that they would get better. But in some cases students have deteriorated to critical conditions and even died needlessly.

Discuss medical care
It is only when medical tragedies occur like the one that took place at Bungoma’s Chemasis High School in 2004 that fleeting attention is paid to the matter of medical care and emergences. During that event six students died and 93 were admitted at Webuye District Hospital after a swamp fever outbreak.
"Medical fees only cater for minor sicknesses and injuries," says Kenya Secondary Schools Heads Association vice-chairman John Awiti.
He says parents should discuss the matter of medical care of their children with schools before an emergency, especially if a child has a pre-existing medical condition.
Awiti, who is also the Principal of St Mary’s Yala, says the school has arrangements with parents with children with chronic conditions such as asthma and diabetes.
"We have instruction from parents to take their children to private hospitals when they suffer attacks and send them medical bills," Awiti says.
That is the approach taken by Ms Pauline Kamau whose daughter, a student at Precious Blood High School, is asthmatic. Kamau agreed with the provincial school that they would take her daughter to Nairobi hospital in case of attacks and inform her. Ministry of Education head of communications John Mwandikwa says the ministry gets complaints from parents who demand that schools settle hospital bills for their children. "We explain to them that our core mandate is tuition…. They should pay hospital bills," he says.
 


the effects of media on the youth



The effects of the media on the youth
Media  commonly known as the fourth estate has to be one of the most influencial factors in todays world and it’s the youth who are mostly affected by it.often our our tv programs,music and video games have exposed them to various thin




One of the positive impact of the media on the youth is that it exposes the youth to information.the young people are made aware of the going ons in their surroundings and through this they get to know of the going on and stay abrest of the current news
Behaviour change is another of the impacts of the media on the youths,i.e, through what one see’s on the tv and what they read on the print media,the youth are able to be educated on the effects of certain behaviours that are not  acceptable and that shouldn’t be practised in the civilised world e.g through the violent portrayal of the post election violence and through the subsequent condemnation and after seeing the damage that  we did to our country in the name of politics one was able to view the events and do some soul searching to know that we did wrong,also throuh the varios behavioural change programs being aired on tv is geared towards ensuring that beforre one acts he is able think of the posssible consequence of his/her actions.
The media as an educational tool  has enabled the youth to gain acccess to diverse knowledge base such that the youth through the print and electronic media are capable of having a wider base fforr conducting research,e.g one can use the internet to do research on certain subjects of interest and also can be able to know the going on in certain fields of study,as the print media engages in articles on say aids, one is informed more on what he already knows.


Tuesday, August 28, 2012

Tools and Techniques of Financial Statement Analysis:


Tools and Techniques of Financial Statement Analysis:

Following are the most important tools and techniques of financial statement analysis:
  1. Horizontal and Vertical Analysis
  2. Ratios Analysis

1. Horizontal and Vertical Analysis:

Horizontal Analysis or Trend Analysis:
Comparison of two or more year's financial data is known as horizontal analysis, or trend analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form.
Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form as has been done in the example below. Showing changes in dollar form helps the analyst focus on key factors t hat have affected profitability or financial position. Observe in the example that sales for 2002 were up $4 million over 2001, but that this increase in sales was more than negated by a $4.5million increase in cost of goods sold. Showing changes between years in percentage form helps the analyst to gain perspective and to gain a feel for the significance of the changes that are taking place. For example a $1 million increase in sales is much more significant if the prior year's sales were $2 million than if the prior year's sales were $20 million. In the first situation, the increase would be 50% that is undoubtedly a significant increase for any firm. In the second situation, the increase would be 5% that is just a reflection of normal progress.

Example of Horizontal or Trend Analysis:

Balance Sheet:

 Comparative Balance Sheet
      December 31, 2002, and 2001
     (dollars in thousands)



Increase (Decrease)

2002
2001
Amount
Percent
Assets




Current Assets:




Cash
$1,200
$2,350
$(1,150)*
(48.9)%
Accounts receivable
6,000
4,000
2000
50%
Inventory
8,000
10,000
(2000)
(20.0)%
Prepaid Expenses
300
120
180
150.0%

----------
-----------
----------
----------
Total current assets
$15,500
$16,470
(970)
(5.9)%

-----------
-----------
----------
---------
Property and equipment:




Land
4,000
4,000
0
0%
Building
12,000
8,500
3,500
41.2%

-----------
-----------
----------

Total property and equipment
16,000
12,500
3,500
28%

----------
-----------
----------
---------
Total assets
31,500
28,970
2,530
8.7%

======
======
======
======
Liabilities and Stockholders' Equity




Current liabilities:




Accounts payables
$5,800
$4,000
1800
45%
Accrued payables
900
400
500
125%
Notes payables
300
600
(300)
(50%)

----------
----------
-----------
---------
Total current liabilities
7,000
5,000
2,000
40%

----------
----------
----------
-----------
Long term liabilities:




Bonds payable 8%
7,500
8,000
(500)
(6.3)%

----------
----------
----------
----------
Total long term liabilities
7,500
8,000
(500)
6.3%

----------
----------
----------
----------
Total Liabilities
$14,500
13,000
1,500
(11.5)%
Stock holders equity:




Preferred stock, 100 par, 6%, $100 liquidation value
$2,000
$2,000
0
0%
Common stock, $12 par
6,000
6,000
0
0%
Additional paid in capital
1,000
1,000
0
0%

----------
----------
---------
--------
Total paid in capital
9,000
9,000
0
0%
Retained earnings
8,000
6,970
1,030
14.8%

----------
----------
----------
----------
Total stockholders' equity
17,000
15,970
1,030
6.4%

----------
----------
----------
---------
Total liabilities and stockholders' equity
$31,500
$28,970
$2,530
8.7%

=====
======
======
======
*Since we are measuring the change between 2001 and 2002, the dollar amounts for 2001 become the base figure for expressing these changes in percentage form. For example, cash decreased by figures $1,150 between 2001 and 2002. This decrease expressed in percentage form is computed as follows:
$1,150 ÷ $2,350 = 48.9%
Other percentage figures in this example are computed by the same formula.

Income Statement:

Comparative income statement and reconciliation of retained earnings
For the year ended December 31, 2002, and 2001
(dollars in thousands)



Increase (Decrease)

2002
2001
Amount
Percent
Sales
$52,000
$48,000
$4,000
8.3%
Cost of goods sold
36,000
31,500
4,500
14.3%

------------
------------
------------
-----------
Gross margin
16,000
16,500
(500)
(3.0)%

------------
------------
------------
------------
Operating expenses:




Selling expenses
7,000
6,500
500
7.7%
Administrative expense
5,860
6,100
(240)
(3.9)%

------------
------------
------------
------------
Total operating expenses
12,860
12,600
260
2.1%

------------
------------
------------
------------
Net operating income
3,140
3,900
(760)
(19.5)%
Interest expense
640
700
(60)
(8.6)%

------------
------------
------------
------------
Net income before taxes
2,500
3,200
(700)
(21.9)%
Less income taxes (30%)
750
960
(210)
(21.9)%

------------
------------
------------
------------
Net income
1,750
2,240
$ (490)
21.9%



======

Dividends to preferred stockholders, $6 per share (see balance sheet above)

120

120



------------
------------


Net income remaining for common stockholders
1,630
2,120


Dividend to common stockholders, $1.20 per share
600
600



------------
------------


Net income added to retained earnings
1,030
1,520


Retained earnings, beginning of year
6,970
5,450



------------
------------


Retained earnings, end of year
$ 8,000
$ 6,970



=======
=======


Horizontal analysis of financial statements can also be carried out by computing trend percentages.
Trend Percentage:
Horizontal analysis of  financial statements can also be carried out by computing trend percentages. Trend percentage states several years' financial data in terms of a base year. The base year equals 100%, with all other years stated in some percentage of this base.
Example:
Consider McDonald's Corporation, the largest global food service retailer, with more than 26,000 restaurants worldwide. McDonalds enjoyed tremendous growth during the 1990s, as evidenced by the following data:
 

2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Sales(millions)
$14,243
$13,259
$12,421
$11,409
$10687
$9,795
$8,321
$7,408
$7,133
$6,695
$6,640
Income(millions)
$1,977
$1,948
$1,550
$1,642
$1,573
$1,427
$1,224
$1,083
$959
$860
$802
By simply looking at these data, one can see that sales increased every year. But how rapidly sales have been increasing, and have the increases in net income kept pace with the increase in sales? It is difficult to answer these questions by looking at the raw data alone. The increases in sales and the increases in net income can be put into better perspective by stating them in terms of trend percentages, with 1990 as the base year. These percentages (all rounded) appear as follows:

2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990

Sales
215%
200%
187%
172%
161%
148%
125%
112%
107%
101%
100%

Income
247%
243%
193%
205%
196%
178%
153%
135%
120%
107%
100%

The trend analysis is particularly striking when the data are plotted as above. McDonald's growth was impressive through the entire 11-year period, but it was out paced by even higher growth in the company's net income. A review of the company's income statement reveals that the dip in net income growth in 1998 was attributable, in part, to the $161.6 million that McDonalds spent to implement its "Made for you" program and a special charge of $160 million that related to a home office productivity initiative.
Vertical Analysis:
Vertical analysis is the procedure of preparing and presenting common size statements. Common size statement is one that shows the items appearing on it in percentage form as well as in dollar form.
Each item is stated as a percentage of some total of which that item is a part. Key financial changes and trends can be highlighted by the use of common size statements.
Common size statements are particularly useful when comparing data from different companies. For example, in one year, Wendy's net income was about $110 million, whereas McDonald's was $1,427 million. This comparison is somewhat misleading because of the dramatically different size of the two companies. To put this in better perspective, the net income figures can be expressed as a percentage of the sales revenues of each company, Since Wendy's sales revenue were $1,746 million and McDonald's were $9,794 million, Wendy's net income as a percentage of sales was about 6.3% and McDonald's was about 14.6%.

Example:

Balance Sheet:

One application of the vertical analysis idea is to state the separate assets of a company as percentages of total sales. A common type statement of an electronic company is shown below:
Common Size Comparative Balance Sheet
      December 31, 2002, and 2001
     (dollars in thousands)



Common-Size Percentages

2002
2001
2002
2001
Assets




Current assets:




Cash
$ 1,200
$ 2,350
3.8%
8.1%
Accounts receivable, net
6,000
4,000
19.0%
13.8%
Inventory
8,000
10,000
25.4%
34.5%
Prepaid expenses
300
120
1.0%
0.4%

------------
------------
-----------
------------
Total current assets
15,500
16,470
49.2%
56.9%

------------
------------
------------
------------
Property and equipment:




Land
4,000
4,000
12.7%
13.8%
Building and equipment
12,000
8,5000
38.1%
29.3%

------------
------------
------------
------------
Total property and equipment
16,000
12,500
50.8%
43.1%

------------
------------
------------
------------
Total assets
$ 31,500
$ 28,970
100.0%
100.0%

======
======
======
======
Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable
$ 5,800
$ 4,000
18.4%
13.8%
Accrued payable
900
400
2.9%
1.4%
Notes payable, short term
300
600
1.0%
2.1%

------------
------------
------------
------------
Total current liabilities
7,000
5,000
22.2%
17.3%

------------
------------
------------
------------
Long term liabilities:




Bonds payable, 8%
7,500
8,000
23.8%
27.6%

------------
------------
------------
------------
Total liabilities
14,500
13,000
46.0%
44.9%

------------
------------
------------
------------
Stockholders' equity:




Preferred stock, $100, 6%, $100 liquidation value
2,000
2,000
6.3%
6.9%
Common stock, $12 par
6,000
6,000
19.0%
20.7%
Additional paid in capital
1,000
1,000
3.2%
3.5%

------------
------------
------------
------------
Total paid in capital
9,000
9,000
28.6%
31.1%
Retained earnings
8,000
6,970
25.4%
24.1%

------------
------------
------------
------------
Total stockholders equity
17,000
15,970
54.0%
55.1%

------------
------------
------------
------------

$ 31,500
$ 28,970
100.0%
100.%

======
======
======
======





*Each asset in common size statement is expressed in terms of total assets, and each liability and equity account is expressed in terms of total liabilities and stockholders' equity. For example, the percentage figure above for cash in 2002 is computed as follows: 
[$1,200 /  $31,500 = 3.8%]
Notice from the above example that placing all assets in common size form clearly shows the relative importance of the current assets as compared to the non-current assets. It also shows that the significant changes have taken place in the composition of the current assets over the last year. Notice, for example, that the receivables have increased in relative importance and that both cash and inventory have declined in relative importance. Judging from the sharp increase in receivables, the deterioration in cash position may be a result of inability to collect from customers.
The main advantages of analyzing a balance sheet in this manner is that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy to see relative annual changes in one business.

Income Statement:

Another application of the vertical analysis idea is to place all items on the income statement in percentage form in terms of sales. A common size statement of this type of an electronics company is shown below:
 

Common-Size Comparative income statement
For the year ended December 31, 2002, and 2001
(dollars in thousands)



Common-Size Percentage

2002
2001
2002
2001
Sales
$52,000
$48,000
100.0%
100.0%
Cost of goods sold
36,000
31,500
69.2%
65.6%

------------
------------
------------
------------
Gross margin
16,000
16,500
30.8%
34.4%

------------
------------
------------
------------
Operating expenses:




Selling expenses
7,000
6,500
13.5%
13.5%
Administrative expense
5,860
6,100
11.3%
12.7%

------------
------------
------------
------------
Total operating expenses
12,860
12,600
24.7%
26.2%

------------
------------
------------
------------
Net operating income
3,140
3,900
6%
8.1%
Interest expense
640
700
1.2%
1.5%

------------
------------
------------
------------
Net income before taxes
2,500
3,200
4.8%
6.7%
Income tax (30%)
750
960
1.4%
2.0%

------------
------------
------------
------------
Net income
$ 1,750
$2,240
3.4%
4.7%

======
======
======
======
*Note that the percentage figures for each year are expressed in terms of total sales for the year. For example, the percentage figure for cost of goods sold in 2002 is computed as follows:
[($36,000 / $52,000) × 100  = 69.2%]
By placing all items on the income statement in common size in terms of sales, it is possible to see at a glance how each dollar of sales is distributed among the various costs, expenses, and profits. And by placing successive years' statements side by side, it is easy to spot interesting trends. For example, as shown above, the cost of goods sold as a percentage of sales increased from 65.6% in 2001 to 69.2% in 2002. Or looking at this form a different view point, the gross margin percentage declined from 34.4% in 2001 to 30.8% in 2002. Managers and investment analysis often pay close attention to the gross margin percentage since it is considered a broad gauge of profitability. The gross margin percentage is computed by the following formula:
Gross margin percentage = Gross margin / Sales
The gross margin percentage tends to be more stable for retailing companies than for other service companies and for manufacturers. Since the cost of goods sold in retailing exclude fixed costs. When fixed costs are included in the cost of goods sold figure, the gross margin percentage tends to increase of decrease with sales volume. The fixed costs are spread across more units and the gross margin percentage improves.
While a higher gross margin percentage is considered to be better than a lower gross margin percentage, there are exceptions. Some companies purposely choose a strategy emphasizing low prices and (hence low gross margin). An increasing gross margin in such a company might be a sign that the company's strategy is not being effectively implemented.
Common size statements are also very helpful in pointing out efficiencies and inefficiencies that might other wise go unnoticed. To illustrate, selling expenses, in the above example of electronics company, increased by $500,000 over 2001. A glance at the common-size income statement shows, however, that on a relative basis, selling expenses was not higher in 2002 than in 2001. In each year they represented 13.5% of sales.

2. Ratios Analysis:

Accounting Ratios Definition, Advantages, Classification and Limitations:
The ratios analysis is the most powerful tool of financial statement analysis. Ratios simply means one number expressed in terms of another. A ratio is a statistical yardstick by means of which relationship between two or various figures can be compared or measured. Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another.

Definition of Accounting Ratios:

The term "accounting ratios" is used to describe significant relationship between figures shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of accounting organization. Accounting ratios thus shows the relationship between accounting data.
Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another. It may be expressed in the form of co-efficient, percentage, proportion, or rate. For example the current assets and current liabilities of a business on a particular date are $200,000 and $100,000 respectively. The ratio of current assets and current liabilities could be expressed as 2 (i.e. 200,000 / 100,000) or 200 percent or it can be expressed as 2:1 i.e., the current assets are two times the current liabilities. Ratio sometimes is expressed in the form of rate. For instance, the ratio between two numerical facts, usually over a period of time, e.g. stock turnover is three times a year.

Advantages of Ratios Analysis:

Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages / Benefits of ratio analysis:
  1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business
  2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms.
  3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and communications.
  4. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.
  5. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc.

Limitations of Ratios Analysis:

The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations.
  1. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived, there from, are also subject to those limitations. For example, non-financial changes though important for the business are not relevant by the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements.
  2. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations.
  3. Ratios alone are not adequate: Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business. Other things have also to be seen.
  4. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios.
  5. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult.
  6. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision.
  7. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpreted and different people may interpret the same ratio in different way.
  8. Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading.

Classification of Accounting Ratios:

Ratios may be classified in a number of ways to suit any particular purpose. Different kinds of ratios are selected for different types of situations. Mostly, the purpose for which the ratios are used and the kind of data available determine the nature of analysis. The various accounting ratios can be classified as follows:
 

Classification of Accounting Ratios / Financial Ratios
(A)
Traditional Classification or Statement Ratios
(B)
Functional Classification or Classification According to Tests
(C)
Significance Ratios or Ratios According to Importance
  • Profit and loss account ratios or revenue/income statement ratios
  • Balance sheet ratios or position statement ratios
  • Composite/mixed ratios or inter statement ratios

  • Primary ratios
  • Secondary ratios


Profitability Ratios:

Profitability ratios measure the results of business operations or overall performance and effectiveness of the firm. Some of the most popular profitability ratios are as under:

Liquidity Ratios:

Liquidity ratios measure the short term solvency of financial position of a firm. These ratios are calculated to comment upon the short term paying capacity of a concern or the firm's ability to meet its current obligations. Following are the most important liquidity ratios.

Activity Ratios:

Activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed. These ratios are also called turnover ratios because they indicate the speed with which assets are being turned over into sales. Following are the most important activity ratios:

Long Term Solvency or Leverage Ratios:

Long term solvency or leverage ratios convey a firm's ability to meet the interest costs and payment schedules of its long term obligations. Following are some of the most important long term solvency or leverage ratios.
Financial-Accounting- Ratios Formulas:
A collection of financial ratios formulas which can help you calculate financial ratios in a given problem.

WHEN YOUR CHILD FALLS ILL IN SCHOOL

When your child falls ill in school… By Harold Ayodo When a student becomes ill or suffers an injury, which between the parent and...