Analysis Of Accounts Flashcards

1
Q

Capital employed formula

A

Share holders equity + non-current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define liquidity

A

The ability of a business to pay back its short term debts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define profitability

A

Measurement of the profit made relative to the value of sales achieved
OR
the capital invested in the business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

3 profitability ratios

A

Return on capital employed
Gross profit margin
Net profit margin

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Return on capital employed formula

A

(Net profit / capital employed) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Gross profit margin formula

A

(Gross profit /Revenue) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Net profit margin formula

A

(Net profit/revenue) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Define Illiquid

A

Assets are not easily convertible into cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Two liquidity ratios

A

Current ratio
Acid test ratio

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Current ratio formula

A

Current assets/current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Acid test/liquid ratio formula

A

(Current assets - Inventories) / Current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Users of accounts

A

Managers
Shareholders
Creditors
Banks
Government
Workers and trade unions
Other businesses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Working capital

A

Current assets - current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Managers as a user of account

A

Use the accounts to help them keep control over the performance of each product/division .
Compare ratios either other competitors and with previous years.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Shareholders as a user of accounts

A

From the income statements , profitability ratios and return on capital employed shareholders can see:
- Whether they should invest in the business by buying shares .
- Also compare the ratios with other companies and with previous years.
- How risky it will be to invest in the company (using liquidity ratios)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Creditors as a user of account

A

Balance sheet and liquidity ratios they will tell :
The cash positions and debts of the business.
How risky it is (If there are liquidity problems they wont supply the business).

17
Q

Banks as a user of accounts

A

They will see:
How risky it is to lend to the business
Therefore only lend to profitable and liquid firms.

18
Q

Government as a user of accounts

A

Looks at the profits of the company to fix a tax rate.
If the business is profitable and liquid enough to continue its operations.
(If the workers jobs would be protected)