TQM

Two aspects of the revenue from the operations must be considered
a) consistency of that revenue overtime or properness of that growth b) how collectible of that revenue and whether the collection period is appropriate with respect to its business

Consider the performance of the company which shall reflect its ability to generate cash and in line with its performance.

Profitability of the company can be assessed using various margins.

• Gross Profit Margin (GPM) measures the earned profit after deducting the costs of goods or services. It is important to consider whether the changes in operating revenue and the changes in the cost of goods or services move in tandem. And whether the changes in the GPM is rational.

Considering whether changes in the company's net profit margin are significant and backed by reasonable justifications.

• Operating Profit Margin Before Depreciation and Amortization represents the profit generated from the company's core business operations over its operating revenue.
• Earnings Profit Margin Before Interest, Taxes, Depreciation and Amortization (EBITDA) Margin represents the profit earned from all transactions, encompassing both core business operations and extraordinary items before interest, taxes, depreciation, and amortization over its total revenue.
• Net Profit Margin measures how much profit a company makes as a percentage of its total revenue.

Analyze the company's net profit (loss) to identify whether it is from business operations or from extraordinary items.

Consider the policies related to inventory management and the credit terms applicable to accounts payable and accounts receivable are reasonable.

• Collection Period indicates the number of days the company takes to collect payment for goods sold or services rendered. An increase in the collection period means that the company takes longer time to collect payments from its accounts receivable.
• Inventory Period indicates how many days the company holds its outstanding inventory, which includes raw materials and work in progress (WIP) and finished goods, before turning it into sales. An increase in Inventory Period means that the company is using more capital for its inventory.
• Account Payment period indicates the number of days the company takes to settle payments with its accounts payable after receiving goods. An increase in this number indicates a slower payment to the creditors.

(Information presented : A plus sign (+) indicates impairment while a minus sign (-) indicates a reversal.)

• The company can achieve growth through various strategies. The most common growth methods are organic expansion of existing business operations and inorganic expansion through mergers and acquisition. Fluctuations in asset valuations indicate changes in asset quality and affect the company's financial position.
• When the company's assets or investments are deemed impaired, the impairment losses must be recognized in the comprehensive income statement and/or the cash flow statement.

Some of the company's investments, assets acquired or investment costs may be recorded as Intangible Asset or Goodwill. The company should review the suitability of such items and analyze how material changes in these items will impact the company's financial positions.