5. APP Flashcards
Company law in the UK recognises two financial reporting frameworks. What are they?
IFRS and UK GAAP
International Financial Reporting Standards
Generally Accepted Accounting Principles
What are accounting principles?
Accounting principles are the rules and guidelines that companies and other bodies must follow when reporting financial statements.
What are the benefits of accounting principles?
Standardised methods of providing data should mean a company’s financial statements are complete, consistent, and comparable.
Explain the fee SCSJV obtians?
NEC3 Option C.
It is NOT a set % fee. It is adjusted based on performance factors, through X20 KPIs.
These are COST & TIME. Smaller factors include HS & Environmental.
A matrix shows this variable fee.
ON OTHER PROJECTS, OR FOR OTHER FIRMS, they will build their fee using a variety of factors, including:
- Profit (e.g 5%)
- Overheads (e.g. 3%)
If a cost item is not listed in the SoCC, then it is not a Defined Cost and is instead deemed included in the Fee, as per Cl 52.1.
Explain turnover.
Revenue / Income from the sale of goods and services.
Explain profit and loss statements.
Financial statements, looking at income and expenditure, to show a company’s net profit or loss in a given period.
What is gross margin & net margin?
They are similar, in that they measure profit against revenue.
The difference being Gross Margin only factors COGS, whereas the Net Margin factors COGS and all other expenses such as overheads and debts.
Gross Margin = Revenue - COGS / Revenue = Profit / Revenue
Explain cashflow statements.
Statement for the amount of cash entering and leaving a company.
What is cash flow?
It’s the movement of money in and out of the company. Good cash flow will mean cash is available in the business to pay suppliers.
What is a balance sheet?
This is a financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific point in time.
It is a ‘snapshot’ of a company’s financial condition.
Asset - Liability = Equity.
What are current assets and non-current assets?
Current assets are assets used within 1 year.
Non-current assets are long-term assets like plant and equipment.
What is Costain’s financial performance like?
2022 FY report.
Revenue up 20%
Operating margin = 2.6%, unchanged
Cashflow went down, I think due to paying off debts or loans.
2023 HY was released recently (compared to the half year last year). Bearing in mind these are unaudited.
Revenue down 0.1%
Operating margin = 2.3%, not much change
Cashflow up marginally.
Briefly talk about IFRS.
International Financial Reporting Standards (IFRS). They are accounting standards used by companies to prepare their financial statements. Is the most widely used set of accounting principles. It is used in more than 120 countries.
Briefly talk about UK GAAP.
Generally Accepted Accounting Principles (GAAP). They are accounting standards used by companies to prepare their financial statements.
What is the role of the auditor?
Report on the financial statement.
Should ascertain the validity and reliability of information. They will check compliance to policy / contract / procedures / regulations.
