Interpretation Scenarios

Question 1

Question to ask myself?

Answer 1

Is there an obvious reason for the change/difference?

Is there anything that the directors of the company can do to resolve the identified issue?

Does the change impact other ratios?

Question 2

One Entity Over Two Periods. What to look for?

Answer 2

Any developments or changes in the business between the two year

Whether the entity’s performance and position has improved or deteriorated. Give reasons

Question 3

Two Entities for the Same Period. What to look for?

Answer 3

Matters affecting only one of the companies

Differences in accounting policies

Question 4

An entity Against Sector Averages. What to look for?

Answer 4

Does entity have different accounting policies and year ends

Question 5

Group accounts. What to look for?

Answer 5

Intragroup transactions eliminated

Subsidiary might be a different industry

Goodwill impairment only affects consolidated, not single entity

Question 6

Group accounts. What to look for in an acquisition?

Answer 6

Consolidated profit is time-apportioned. But current assets and current liabilities are included in full

The subsidiary may be in a different market

Results from previous years won’t be comparable, as there was no acquisition there

Question 7

Group accounts. What to look for in a disposal?

Answer 7

Gain or loss on disposal in CSPL. CSFP won’t include any of the assets

Potential closure or redundancy costs

Professional fees associated with the disposal