Finanical Reports

Question 1

What is capital? (money)

Answer 1

liquidated assets - cash in hand

Question 2

why do we need Financial ReportingStandards?

Answer 2

important when defining contractual entitlements inculding rights

minimises Risk of irresponsiblebehaviourby directors and managers

Question 3

what is corporate governance?

Answer 3

deals with conflicts of interest between​ providers of finance and senior management
and shareholders

Question 4

what Financial statements are standrised by the International Financial Reporting Standards (IFRS):​

Answer 4

A statement of income
A statement of changes in equity​
A statement of financial position (Balance Sheet)​
A statement of cash flows

Question 5

Income statement

Answer 5

Gross Profit
Operating income
Income before taxes
Net income

Question 6

The Balance Sheet

Answer 6

Balance Sheet

• Assets
• Liabilities
• Equity
• valuable resources

There are three general sources:
1) Borrowing
2) Take money from own private savings
3) Reinvest profits that the company is making

Question 7

statement of Cash Flows

Answer 7

Operating: Cash received - vendors, Taxes and Interests

Investing: long-term assets

Financing: New loan procurements, investors, Paid dividends

Question 8

what two types decisions do firms face?

Answer 8

Investment decision – purchase of real assets

Financing decision – sale of assets and equity financing

Question 9

what is cash flow

Answer 9

incoming and/or outgoing of money

Question 10

what are the two main types of cash flow forecast?

Answer 10

Company - otherwise known as organisational cash flow.

particular contract or project - otherwise known as the project cash flow.

Question 11

who manages cash flow?

Answer 11

QS

Question 12

when does the QS make cash flow forecasts?

Answer 12

Cash flow forecast from initial brief

initial cash flow forecast at feasibility stage

Update cash flow forecast throughout design, tendering and contract period.

Monitor payments against the cash flow forecast and explain any discrepancies.

Question 13

What are financial ratios? (6)

Answer 13

All aspects of a project’s finance, showed in a chart:

Profitability Ratios - profits, gross profit margin, net opertaing profit after tax (NOPAT)

Liquidity Ratios - opertaing cash ratio

Working capital Ratios - account receivable and payable day, and inventory day

Asset Usage Ratios - Asset Turnover Rate
Activity Ratio, and Working Capital Absorption

Efficiency Ratios - Return On Equity and Return on total Assets

ROA (return on assets ratio) - Measures net income produced by assets