3.5.1 - Interpretation Of Financial Documents Flashcards
What is a a statement of comprehensive income?
Shows if the business has made a profit or loss during the year
Revenue
The money into the business through ordinary trading
- Also known as turnover or income
Formula- Quantity x Price per Unit
Gross Profit
The cost of stock that is to be sold as part of ordinary trade for the business
Formula- Revenue - Cost of Sales
Expenses
Expenses are costs to the business that have nothing with stock or the making of the product
E.g - Administration, Advertising, Petrol
Operating Profit
Operating Profit is a true measure of how much profit / loss the business has made over the year, before tax is deducted
This information is used by potential investors of the business to see how hard their money would work if it was invested into the business
Operating Profit
Operating Profit is a true measure of how much profit / loss the business has made over the year, before tax is deducted
This information is used by potential investors of the business to see how hard their money would work if it was invested into the business
Stakeholder Interest
Shareholders - Want to know the final profit figure which dividends will be paid out on
Investors - Want to know the profitability of the business
Employees & Managers - May want to know the expenses of the business
Statement of Financial Position (SOFP)
The Statement of Financial Position shows what the business owns and owes on one day of the year
A snapshot of the business
Key Info on SOFP - Current Assets
Items that the business owns that they pay back in under a year
E.g
-Stock
-Debtors
-Cash
Key Info on SOFP - Non-Current Assets
Items that a business owns but will be paid back for more than a year
Key Info on SOFP - Current Liabilities
Items which the business owes which must be with a year
Key Info on SOFP - Long Term Liabilities
Items that the business owes but will be repaid over a term longer then a year
Stakeholder Interest
Governments - will use the financial information to calculate the amount of tax (VAT and Corporation) that a company has to pay
Shareholder - will analyse the accounts and decide whether their investment capital is being used effectively
Directors - and senior managers will use the accounts to assist their medium and long-term planning
Potential Investors- will analyse the accounts to determine whether or not the company would make a good investment
Creditors - will use the accounts to ascertain the company’s ability to pay their bills
