Subs: Accounting Principles & Procedures

Question 1

What does a set of public limited company accounts include?

Answer 1

• Chairman’s statement
• Independent auditor’s report
• Income statement (profit and loss account)
• Statement of financial position (balance sheet)
• Corporate governance report
• Remuneration report
• Other statutory information

Question 2

What does a balance sheet (statement of financial position) show?

Answer 2

Statement of the business’s financial position showing its assets and liabilities at a given date, usually at the end of a financial year
* Assets: cash, property, debtors and other investments
* Liabilities: borrowings, overdrafts, loans and creditors

Question 3

What does the cash flow statement show?

Answer 3

Shows actual receipts and expenditure. It is not included in the annual accounts but is prepared for management purposes

Question 4

What are the three primary types of financial accounts?

Answer 4

Balance Sheet
Profit and Loss Account
Cash flow statement

Question 5

Who are audited accounts prepared by?

Answer 5

Chartered or Certified Accountant

Question 6

What is a covenant strength?

Answer 6

Ability of a tenant to meet the covenants of the lease.
Includes:
* rents,
* service charge,
* repairing and insuring obligations and;
* statutory obligations

Question 7

What is a D&B rating?

Answer 7

The D&B Rating is an indicator that assesses the creditworthiness of a company based on the financial strength of the business, payment behaviour, age of the company, company size and other important factors

Question 8

What are the two components comprising the D&B rating?

Answer 8

• Financial Strength (e.g. 5A) rating is based on the tangible net worth as computed by D&B from financial statements supplied by the company. The rating indicates the credit capacity
• Risk Indicator highlights the chance of business failure, ranging from 1 – 4 with one reflecting low/minimum risk and four reflecting high risk

Question 9

What is the risk indicator score produced by D&B based on?

Answer 9

• Outstanding charges or slow payment experiences reported
• Tangible net worth of the parent company
• Pre-tax profit over total assets ratio
• Values, ratios and trends from the Balance Sheet

Question 10

What do the two scores produced by D&B show?

Answer 10

• Delinquency Score shows an organisation’s relative rank of delinquency against other organisations in the country by percentiles (100 = lowest risk, 1 = highest risk)
• Payment Score (Paydex) shows an organisation’s payment timeliness based on their trade history (<80 = slow payments, 80 = prompt payments, >80 = payment before due)