Webclass 74: Balance sheet ratios for risk assessments

Q1. When looking at the Balance Sheet and the Income Statement and doing horizontal or vertical movement analysis, would we usually compare the numbers relating to the opening balance, the net movements or the closing balance?

Q2. When doing vertical analysis, would we compare the values between different posts on the balance sheet/ income statement or between different fiscal years?

Q3. Do the Balance Sheet accounts always start at 0 at the beginning of the fiscal year or do the P&L accounts always start at 0 at the beginning of the fiscal year?

Q4. If I want to know which accounts are Balance Sheet accounts and which accounts are P&L accounts, which fields could we look at in the chart of accounts in SAP?

Q5. Which field in the SAP chart of accounts will help me to know which accounts are for debtors, creditors or fixed assets?

Q6. How could I easily see accounts relating to Balance Sheet adjustments (assuming the SAP system is correctly configured?

Q7. Why would we want to organize accounts into hierarchies?

Q8. Which statement is correct?

Q9. Why would we calculate the variance based on the closing balance and not based on the total movements?

Q10. Why can we not add up the balance per account and month?

Q11. What could be the risk indicated by an unusually high increase in the sales/ cash ratio? 

Q12. What could be the risk indicated by an unusually high decrease in the inventory/ expenditure ratio?

Q13. What could be the risk indicated by an unusually high increase in the receivables/ revenue ratio?