week 1 Flashcards
who are interested in financial statements?
-investors/shareholders/analysts
-government (HMRC)
-banks
-competitors
-employees
-suppliers
-customers
-general public
key information needed (3 questions)
-profitability- statement of profit or loss
-solvency- ability to pay debts as they fall due, amount of risk (debt) statement of financial position
-can business generate cash needed- statement of cash flow
statement of profit or loss
revenue
less expense
profit
statement of financial position
assets
equity
liabilities
statement of cash flows
cash flows from operating activities
cash flows from investing activities
cash flows from financing activities (raising money and paying back e.g. loan)
net increase/decrease in cash
international financial reporting standards (IFRS)
-international accounting standards board (IASB)
-detailed rules
-narrowing the areas of difference and variety of accounting practices
countries using IFRS
over 140 countries require all or most domestic listed companies to comply with IFRS. including all EU members, USA, china
Asset
resource we control with potential to bring in profit
Non-current asset
kept and used on permanent basis. Hold at least one year from accounting date
-land and buildings
-plant and machinery
-fixtures and fittings
-motor vehicles
*(order of liquidity) *
current assets
change day to day, less than 1 year.
-inventorie
-trade receivables (customers owe business money)
-cash
*(order of liquidity) *
liquidity
how quickly converted to cash
liabilities
obligation a business owes money to someone
non current liabilities
pay back in more than a year
-bank loan
current liabilities
pay back in less than a year
-trade payables (suppliers we owe)
-bank overdraft (payable on demand)
