financial reporting

Question 1

5 key principles of corporate governance

Answer 1

board leadership and company purpose
division of responsibilities
composition, succession and evaluation
audit, risk and internal control
remuneration

Question 2

framework of rules in corportate covernance is built up of ? (3)

Answer 2

disclosure - timely and useful information
accountability - responsibilities should be outlined
fairness - directors should not use superior information to gain an advantage

Question 3

what is corporate governance

Answer 3

Corporate governance is the system by which business corporations are directed and controlled.
assuring the suppliers of finance to the corporation of a return on their investment

Question 4

Describe the scope of corporate governance

Answer 4

includes the activities of the shareholders, the board and management.
may include the regulators, auditors and the financial market instutions in control of investment

Question 5

how is corporate governance regulated in the uk

Answer 5

by the UK Corporate Governance Code, which those companies that are listed on the London Stock Exchange must apply on a ‘comply or explain’ basis

Question 6

ROSF

Answer 6

profit after tax for the year / (share capital & reserves)

Question 7

ROCE

Answer 7

operating profit / share capital & reserves+ long-term liabilities

Question 8

income statement format

Answer 8

sales reveune - CGS = gross profit
gross profit - operating expenses = operating profit
+ non operating expenses/income
= net profit

Question 9

5 classifications of ratios

Answer 9

profitability - profit ( owner intrest)
efficiency - resoruces
liquidity - ability to meet liabilities
financial gearing - risk
investment - asses returns for investors

Question 10

purpose of financial statement analysis

Answer 10

to give us useful insights about the position and performance of the business

Question 11

business convention

Answer 11

owners and the busniess are treated as seperate entities from an accounting perspective

Question 12

what is going concern

Answer 12

finanical statement is prepared on the assumption that the busniess will continue to operate in the future

Question 13

historic cost convention

Answer 13

assets on the balnce sheet are recorded at their aquisition cost instead of using their rapidy fluctuating current value

Question 14

dual aspect convention

Answer 14

each transaction will effect 2 parts of the balance sheet

Question 15

prudence convention

Answer 15

assets + liabilities should not be over/understated due to market value of hte company

Question 16

examples of investing activites

Answer 16

purchasing of captial
buying shares in another company

Question 17

example of financing activities

Answer 17

loans
paying dividends

Question 18

ratios that shareholders would be interested in

Answer 18

profitability, investment, gearing
potential returns in relation to risk

Question 19

ratios that long term lenders would be interested in

Answer 19

profitability, gearing
concerned with long term viability and ability to meet scheduled payments

Question 20

ratios that short term lenders would be interested in

Answer 20

liquidity
concerned with the abillity to be paid back

Question 21

role of accounting

Answer 21

to report on financial position and cash flow of a business/ information is then used to reach decisions about how to manage, invest, or lend money to the business
social role in bridging the gap between profit making and society

Question 22

purpose of statement of financial position

Answer 22

shows infomation about the assets liabilities and resulting owners intrest