Published Accounts Flashcards
Why do businesses publish accounts?
Because every limited company is required by law to produce financial statements each year.
Where do businesses need to publish their accounts?
With Companies House and HMRC, Also to shareholders.
What is the benefit of published accounts to shareholders?
Able to see: profitability, liquidity and dividends paid
Why?: Likelihood of future dividends, level of future dividends, implication of future share price
What is the benefit of published accounts to employees?
Able to see: Profitability, liquidity
Why? Job Security, pay increases or bonuses
What is the benefit of published accounts to Suppliers?
Able to see: Liquidity, trade payables days, capital gearing
Why? Likelihood of being paid on time, possibility of not being paid, deciding whether to review credit terms
What is the benefit of published accounts to customers?
Able to see: Liquidity
Why? Likelihood that the company will continue to supply products
What is the benefit of published accounts to lenders?
Able to see: Profitability, liquidity, capital gearing
Why? Whether the company will be able to afford repayments and interest
What is the limitation of published accounts? 4
Historical data from previous years
Income statement is in summary format
Values of assets may be inaccurate due to policies (depreciation)
Do not show non-financial considerations
