interpretation of account theory Flashcards
what to discuss with friends and shareholders
profatiblity
ROCE has dis/improved by % the firm is / not profitable this is satisfactory/not ROCE higher than return on risk free investments gross profit has inreased Roce higher than the cost pf borrowing
what percentage are risk free investements
1-2%
what to discuss with friends and shareholders
liquidity
acid ratio has dis/improved
the firm is liquid has liquidity problems
is it satisfactory
above below recommended ratio 1:1
has problem meeting short term debts as they fall due from liquid assets
shareholders will be pleased
what to discuss with friends and shareholders
share price
market price dis/improved £
shows growing/falling confidence from shareholders
the P/E ratio has dis/improved from X years
which shows it will take longer to recoup investement
by purchasing X shares you will own X%
might seem like good price but ask why it is available at this price
what to discuss with friends and shareholders
divedend pocicy
DPS has dis/improved by Xc
dividend yield dis/improved by X%
dividend cover dis/improved by Xtimes
will shareholders be happy
happy with improving trends as more dividends
happy money being put back into improving businesss
what to discuss with friends and shareholders
gearing
the gearing ratio has dis/improved
the firm is high/ low geared
the firm is/not dependent on outside borrowing
is/not at risk from outside investors
please shareholders as increases chances of getting dividends
the firm has the ability to borrow funds in future
interest cover dis/improved by times no problem paying off interest
what to discuss with friends and shareholders
investments
investments cost
Now market price is $
indicated good/poor management of resources
if investments are sold will be gain/loss of $
debentures due to be repaid in20(21)
is/no debenture redemption reserves require more less borrowing
what to discuss with friends and shareholders
sector
the company operates in the _ sector growth area or decline short term long term competition potential for profit 3 or 4 comments on the sector
what to discuss with friends and shareholders
conclusion
would shareholders be happy
there is concern over
it is looking forward to the future
therefore i would advise my friends to/not buy shares
