3.5.1 Interpretation Of Financial Statements Flashcards
What is a statement of comprehensive income (SOCI)?
A document that shows if a business has made a profit during the year.
What is the key information on a SOCI?
-Revenue
-Gross profit
-Expenses
-Operating profit
Sales revenue =
Quantity X Price
Gross profit=
Revenue - Cost of sales
What are cost of sales?
The cost of the stock that is to be traded.
What are expenses?
Costs to the business that have nothing do do with stock.
Operating profit =
Gross profit - Expenses
Which stakeholders would be interested in a SOCI?
Shareholders; want to the final profit figure which dividends will be paid out on.
Investors; want to know the profitability of the business.
Employers + managers; wish to know the expenses of a business.
What is a statement of financial position (SOFP)?
A document showing what the owns + owes on one day of the year.
What is the key information on a SOFP?
Current assets
Non-current assets
Current liabilities
Long-term liabilities
Current assets are…..
items that the business owns that will pay the business in under one year: stock, debtors, cash.
Non-current assets are….
items that a business owns but will pay the business back after 1 year: machinery, vehicles, property.
Current liabilities are….
items that the business owes, that need to be paid by the business, within 1 year: trade payables.
Long term liabilities are….
items that the business needs to pay, but that is not due for total movement within one year: loans, retirement provision.
What stakeholders would take interest to a SOFP?
-Governments
-Shareholders
-Directors
-Potential investors
-Creditors
