Wk 8 Financial Statements and Analysis

Question 1

Features of Annual Reports?

Answer 1

• Formal yearly reports to all external stakeholders about the performance of the company
• Act as carriers of info from managers/ firm to stakeholders
• Include both financial statements and other info

Question 2

What is the general structure of Annual Reports?

Answer 2

1. Management’s message (PR)
2. Regulatory Portion (includes financial statements)
3. Other info

Question 3

What are three issues with Reporting?

Answer 3

• Qualitative V Quantitative info
• Info Overload
• Creative Accounting

Question 4

Explain the Qualitative V Quantitative info issue with Reporting?

Answer 4

• It is difficult to capture all aspects of performance and potential in numbers, hence qualitative reporting adds value
• However this is subject to manipulation to project a certain image

Question 5

Explain the Information Overload issue with Reporting?

Answer 5

Too much information can make it difficult to separate the relative information

Question 6

Explain the Creative Accounting issue with Reporting?

Answer 6

Creative Accounting = Act of preparing accounting reports in such a way that it does not disclose true facts

Question 7

On which two bases can analysis/ comparison of a company be evaluated?

Answer 7

• Across time
• Across firms

Question 8

Ratio Analysis?

Answer 8

• Related one figure in the financial statements to some other figure in the same set of financial statement
• Offers a basis for relative comparison over time and competitors

Question 9

What factors can illustrative Ratios include?

Answer 9

• Profitability
• Efficiency
• Liquidity
• Risk
• Investor