Accounting & Business Flashcards
What did you learn in your Accounting (CPD) training?
That the objective of creating accounts is to provide information on a business’s financial position. Learnt about some of the accounts prepared, e.g. balance sheets and profit and loss accounts.
What is a balance sheet?
- Statement of a businesses financial position
- Shows assets and liabilities at a given date (usually end of financial year)
(Assets – cash, property, debtors, other investments)
(Liabilities – borrowings, overdraft, loan and creditors)
What is a profit and loss account?
- Summary if businesses income and expenditure, usually annual
- shows whether a company made a profit
What is a cashflow statement?
- Shows actual receipt and expenditure (incl. VAT)
- shows whether a company generated cash
What are current and non-current assets?
(Assets – cash, property, debtors, other investments)
Current = to be converted to cash within 1 year, e.g. a property sold soon.
Non-current = not likely to be converted to cash within 1 year e.g. trademarks, property, plant and equipment
What are current and non-current liabilities?
(Liabilities – borrowings, overdraft, loan and creditors)
Current = amounts owed within 1 year, e.g. overdrafts, short-term loans
Non-current = long-term financial obligations e.g. deferred payments, long-terms loans
What is the difference between Management Accounts and Audited (Company) Accounts?
Management – prepared for internal use by a business and are NOT audited
Audited – prepared by a Chartered Accountant
Statutory – mandatory for limited companies, generically formatted, requested by HMRC
What is UKGAAP?
UK Generally Accepted Accounting Principles – valuations for inclusion in financial statements are prepared in accordance with this. CBRE uses USGAAP.
What do you know about IFRS 16?
Effective after 1 January 2019.
Brought in as transparency measure.
All leases over £500/12 months now recorded on balance sheet, as NPV of the full lease cashflow.
What do you discuss in the land team meeting?
Team WIP
What did you learn at CBRE UK Business Update?
Market: UK RE investment holding up, but volumes forecast to fall in 2020 and 2021.
Company annual performance: 2018 UK revenue against 2017, increased by 4%
Objectives: Focus on key growth areas e.g. BTR and healthcare. Technology.
Why is it important to assess the covenant strength?
Affects the perception of risk; particularly in relation to default on leases financial commitments. Knowing a prospective tenant’s covenant strength can help to mitigate risk and help a valuer to comment on suitability for lending.
What can you use to assess covenant strength?
A Dun and Bradstreet report or an Experian report.
What would you find on a Dun and Bradstreet Report?
The report summarises a companies’ financial position. Gives Rating and maximum credit recommendation.
Gives a D&B Rating – the first part relates to financial strength. The second part is a risk indicator.
Part 1 of Rating:
5A, 4A, 3A, 2A, 1A, B, C, D, N (Negative net worth)
Part 2 of Rating:
1-5: 1 is minimum risk, 5 is maximum risk.
The best Rating is 5A1 and is institutional grade.
How do you communicate covenant strength to the client?
Include details of the result of the report it in the valuation report. We do not send the report to the client.
As surveyors we do not comment as to whether the covenant is good or bad in certain terms, but we comments on how the covenant might be perceived in the market that the asset operates in.
