Interpreting published accounts

Descrição

FlashCards sobre Interpreting published accounts, criado por barbare.rukhadze em 31-03-2015.
barbare.rukhadze
FlashCards por barbare.rukhadze, atualizado more than 1 year ago
barbare.rukhadze
Criado por barbare.rukhadze mais de 9 anos atrás
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Resumo de Recurso

Questão Responda
Ratio analysis A technique for analysing a business's financial performance by comparing one piece of accounting information into another
Types of ratios * Profitability * Financial efficiency * liquidity and gearing * Shareholders ratios
Profitability ratios net profit margin- this ratio measures relationship between the net profit and the level of turnover on sales made {F} Net Profit margin= net profit/revenue X 100 ROCE - also called the primary ratio and it measure the efficiency of the business in using its capital to generate profits {F} ROCE= operating profit/total capital employed X 100 * higher the figure for these ratios the better
Financial efficiency ratios Asset turnover= revenue/net assets employed this measures the efficiency at which the business makes use of its assets Inventory (stock) turnover- cost of goods sold/average inventories Inventory turnover= average inventories X 365/cost of goods sold Average inventories= (opening inventories+closing inventories)/2
Receivables collection period receivables collection period=receivables X 365/ revenue (expressed as days)
Payables collection period Payables collection period= payables X 365/ revenue (expressed as days)
Liquidity ratios Current ratio acid test ratio gearing
Current ratio Current ratio= current assets : current liabilities (A firm wants to operate at 2:1)
Acid test ratio Acid test= liquid assets (current assets-inventories): current liabilities (a normal ratio might be between 0,6:1 and 1,1:1)
Gearing Gearing measures the proportion of capital employed by the business that is provided by long-term lenders against the proportion that has been invested by the owners {F} Gearing=non-current liabilities/total capital employed X 100
Shareholders Ratios Dividend per share (DPS) Dividend Yield
Dividend per share This ratio is the total dividend declared by a company divided by number of shares the business has issued {F} DPS= total dividends/number of total shares
Dividend yield This is the dividend per share (for the entire year) expressed as a percentage of the market price of the share {F} Dividend yield = dividend per share/market share price X 100
Drawbacks of the ratio analysis * It is retrospective - concentrates on past performance and is not forward looking * Different companies might use different accounting policies *Provides no information about non-financial matters such as state of the market, the morale of the workforce *It doesnt take into account the effect inflation may have on reported figures

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