3.4 Final Accounts

Question 1

Final Accounts

Answer 1

• these outline the financial performance of a business over a period of time
• for publicly held companies these are published in the annual report
• Might include:

statement of profit & Loss
balance sheet
cash flow

Question 2

Internal Stakeholders

Answer 2

investors - current and potential - should I invest
Managers - measure performance against target

Question 3

External Stakeholders

Answer 3

Banks - should we lend to business
suppliers - should we give them trade credit
employees, customers, government etc

Question 4

Profit & Loss Account

Answer 4

Summary of the business’ financial performance over a given time period
uses the revenue, cost and profit over a period of time to calc how much money the business has made

Question 5

P&L Structure

Answer 5

Sales revenue
cost of sales
gross profit
expenses
profit before interest and tax
interest
profit before tax
tax
profit for period
dividends
retained profit

Question 6

payment of dividends

Answer 6

the business may choose to pay out dividends to owners
the rest is retained and put back into growing the business

Question 8

Pros of paying dividends

Answer 8

satisfies shareholders who get a return
possible impact on share price

Question 9

Pros of not paying dividends

Answer 9

can retain the money and grow the business
may lead to higher profits and dividends in the future

Question 10

Balance Sheet

Answer 10

Records the net worth of a business at one moment in time

Question 11

Assets

Answer 11

items of monetary value owned by the company