L3: Financial Statements Flashcards
How must non-current assets be presented?
At fair value (amortisation/depreciation)
What is another name for capital and reserves?
Equity
What is important to note about current liabilities?
Due within the next financial cycle
How are profit, revenue and expenses linked (for the same period)?
Profit (or loss) = revenue - expenses
What is the cost of sales?
The cost of economic resource that was procured and directly used to complete sales, e.g. materials
Why use ratios?
Helps to understand implications of figures and allows comparison between organisations
What are the key types of investment ratios?
- Investment
- Efficiency
- Profit performance
What are the key types of financing ratios?
- Liquidity
- Leverage (gearing)
What are the limitations to ratios?
Not comprehensive - just act as indicators. Creative accounting can hide full picture. Inaccurate data (e.g. asset valuation) can be disastrous.
