Annual Reports And Accounts Flashcards
What are reports
Sources of info relating to Co current and future business strategies
Filing obligations for reports and accounts
Obligations for UK quoted companies set out under CA06 (section 447)
Directors must deliver annual to registrar copies of
- company accounts (B/S, income statement, cash flow statement, notes, statement of changes in equity and auditors report - shows true and fair view of Co position)
- directors report
- directors remuneration report
What does the directors report show
Provides stakeholders with explanations and interpretations of figures contained in p/l
General statement highlights significant matters (review of years activities, future strategic direction, etc)
Provides more info required by CA06
What does the directors remuneration report show
Provides details of directors pay and other benefits
Lists remuneration types and amounts
Company accounts
Publication of accounts allows investors and analysts to relate SP to dividend and profits
Therefore work out shares are over or under priced
Company borrowing must be ascertained from balance sheet/ Statement of financial positions
CA06 requirement for companies to post accounts on website/ fully accessible
What is obtained form statement of comprehensive income
Profit and loss account
Indicates if Co has made a profit or loss in given period = measure performance
Used to compare actual and expected results
Calculates Gross profit and Net profit
Revenue/ sales - COGS = GP (trading rev)
GP + non sale rev - total expenses = NP
What else can statement of comprehensive income be used for
Help business plan ahead and adjust existing strategy
Measure so success or failure
Calculate any taxes due on profits (paid to rev authorities)
What does the statement of financial position show
Balance sheet
Snapshot of Co financial state of affairs @ given date
Summary sheet of individual account balances, assets (debtors) liabilities (creditors) and capital - works out value of each
Used to calculate ratios; gearing and liquidity
Indicates how Co performing
What ratios does b/s show
Gearing ratio = debt (LTL) / Equity (ord shares)
Liquidity - ability to settle short term debts as they fall due (12months)
Current = CA/CL
Acid test = CA - inventory / CA
Inventory hard to sell so taken off
Shows how liquid Co is using cash and receivables (debtors)
Limitations of B/S
Issued amounts on statements can be OFD as not valued for some time. I.e loans
however still useful snapshot of Co at time of publication
Intangible assets must be included
Must consider b/s of subsidiaries
Indicator of cos worth if forced into liquidation (investors might get much less than stated book value of assets)
