Understanding Financial Statements

Front

What is included in a company's full-year financial statements?

Back

Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash Flow, Statement of Changes of Equity, and Notes to the Account.

Front

What does the Statement of Financial Position represent?

Back

It represents the company's assets, liabilities, and equity at a specific point in time.

Front

What is the purpose of the Auditor's Report in financial statements?

Back

To provide assurance that the financial statements are drawn up in accordance with approved accounting standards.

Front

What is the significance of the Directors' Report?

Back

It attests to the true fairness of the financial position and results of the company.

Front

What are the key financial ratios used to assess a company's solvency?

Back

Current Ratio and Quick Ratio.

Front

What does the Gearing Ratio measure?

Back

It measures the reliance on external debts relative to internal shareholders' equity.

Front

What is the formula for the Current Ratio?

Back

Current Ratio = Current Assets / Current Liabilities.

Front

What does a high Gearing Ratio indicate?

Back

It indicates a higher reliance on external financing.

Front

What is the Debt Service Ratio used for?

Back

To assess the creditworthiness of borrowers in relation to their ability to service their debts.

Front

What does the Gross Profit Margin (GPM) represent?

Back

The amount in excess of cost of goods sold that is available to meet operating expenses.