Accounting - 9215 OxfordAQA

Interpretation, Analysis And Communication Of Financial Information

Akopọ

Two shops on the same street both report a profit of $45 000. One of them is a bargain and one of them is in trouble, and the profit figure alone cannot tell you which. The first may have used $180 000 of the owner's money to earn it while the second used $600 000. The first may hold enough cash to pay next month's bills while the second is a week away from being unable to pay its suppliers at all.

This is the topic that turns figures into judgements. You will learn who reads a set of accounts and what each reader is looking for, calculate the nine ratios the specification names, and use them to say something defensible about whether a business is profitable and whether it can pay its debts. You will also see why a profitable business can run out of money, and why every ratio you calculate has to be treated with a certain amount of suspicion.

Awọn Afojusun

  1. Identify internal and external stakeholders who have an interest in a business organisation.
  2. Calculation and interpretation of financial measures and ratios.
  3. Appraising business performance by using financial statements and ratios.
  4. The difference between cash and profits and the effect of transactions on profitability and liquidity.
  5. The limitations of financial statements and ratio analysis when assessing business performance. Use of computers in accounting.

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Akọ̀wé Ẹ̀kọ́

A gross profit of $90 000 is neither good nor bad until you know what it was earned on, what it was last year, and what a similar business earns. That is the whole idea behind ratio analysis: express one figure in terms of another so that businesses of different sizes, and the same business in different years, can be compared honestly.

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  1. Which item is NOT included when calculating the liquid capital ratio? A. Bank B. Inventory C. Other receivables D. Trade receivables Answer: B
  2. A business has a gross profit of $60 000 and cost of sales of $240 000. What is the mark-up? A. 20% B. 25% C. 60% D. 80% Answer: B
  3. Which is an internal stakeholder of a business? A. Customer B. Employee C. Government D. Supplier Answer: B
  4. Trade receivables are $30 000 and credit sales for the year are $365 000. What are the trade receivable days? A. 12 days B. 30 days C. 36 days D. 122 days Answer: B
  5. A business with a current ratio of 2:1 pays a trade payable by bank transfer. What is the effect on the current ratio? A. It becomes exactly 1:1 B. It decreases C. It increases D. It stays the same Answer: C

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