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IAS & IFRS Standards Overview > Analysis of FSs Intro > Flashcards

Analysis of FSs Intro Flashcards

1
Q

An analysis of financial performance and position composition?

A

Ratio analysis

Analytical review

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2
Q

What is included in ratio analysis?

A

Profitability
Liquidity
Working capital
Solvency
Investor

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3
Q

What is included in the analytical review?

A

Explanation of movement in balance and/or ratio

User focus

Business factors/industry

Accounting policies

One-off items

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4
Q

Examples of explanation in movement and/or ratio?

A

Current year vs prior year
Company A vs Company B

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5
Q

Examples of user focus?

A

Shareholders => Risk vs Return

Suppliers/banks => Liquidity/solvency

Competitors => Sales, profits and margins

Government => Profit, job creation

Customers => Service/quality

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6
Q

Examples of business factors/industry?

A

Manufacturing
Service
Construction

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7
Q

Examples of accounting policies?

A

Revaluation vs cost model
FIFO vs AVCO
Financial assets

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8
Q

Example of one-off items?

A

Restructuring (provisions)
Impairment
Acquisition/disposal of subsidiary
Disposal of non-current assets

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9
Q

What is profitability?

A

Gross margins
Operating margins
Net profit margins
ROCE
Asset turnover

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10
Q

What is liquidity?

A

Pay off debt as quickly as possible through cash

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11
Q

What is working capital?

A

Useful for generating cash in a business.

Selling goods on credit

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12
Q

What is solvency?

A

Long-term working capital and liquidity

Pay off long-term debt (e.g. bank borrowings)

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13
Q

What is investor ratios?

A

Dividend yield
Dividend cover
EPS

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14
Q

Shareholders => Risk vs Return user focus?

A

See profits, see dividends paid. Manage risk

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15
Q

Suppliers/banks => Liquidity/solvency user focus?

A

Want their money back. Liquidity short-term, solvency long-term

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16
Q

Competitors => Sales, profits and margins user focus?

A

Does Company A have better margins than Company B

17
Q

Government => Profit, job creation user focus?

A

More profits, more tax

Investing and recruiting more staff

18
Q

Customers => Service/quality user focus?

A

Quality of service and goods provided by the business

19
Q

Manufacturing business characteristics?

A

Look at cost of sales and gross profit

20
Q

Service characteristics?

A

Low cost of sales

21
Q

Construction characteristics?

A

How IFRS 15 has impacted the revenue and margins

22
Q

Revaluation model vs cost model?

A

Revaluation model - higher value of assets in FS
Higher assets = more depreciation and lower profitability

23
Q

FIFO vs AVCO?

A

FIFO values at most recent purchase price of goods.

If prices icnreases, higher inventory in FIFO than AVCO

24
Q

Financial assets?

A

Two different business with same investment. Different intentions mean one might put in SPL and other might put in OCI

25
Q

Restructuring (provisions)

A

Provision amde in one period, but not next.

26
Q

Impairment

A

Makes results look worse if there is an impairment

27
Q

Acquisiton/disposal of subsidiary

A

Consolidate the results. Suddenly performance looks better as subsidiary’s profits are recorded

28
Q

Disposal of non-current assets?

A

Profit or loss on disposal, may need to be remvoed to get like–by-like comparison

29
Q

How does PBIT differ from operating profit?

A

PBIT is operating profit + non-operating income - non-operating expenses

30
Q

When inventories are purchased from suppliers on credit? (Payables or receivables)

A

Payables payment period is used

31
Q

Characteristics of a supermarket?

A

Low receivables
Low cash
Medium inventories
Very high payables

32
Q

What is a settlement discount?

A

Reduction in amount of money owed by a buyer if payment made within period of time

IAS & IFRS Standards Overview (73 decks)

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