Using financial data to measure and assess performance

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What is a Balance sheet
Accounting statement of the firm's assets and liabilities on last day of accounting period
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What does a Balance sheet list
The assets that firm owns and sets these against the balancing liabilities
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Non-current assets
Machinery, equiptment and vehicles brought for long-term use
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Current assets
Inventories and raw materials, cash these will all be converted into cash at the end of the financial year
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Shareholders equity
Money invested in a company to require assests that a business needs to trade
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Non-current liabilities
Borrowed from external sources which will be repaid over the long term
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Current liabilities
Debts of the business that will be repaid in the short term - payables and overdrafts
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Balance sheet - 'snapshot'
Only shows finances from one day in the year
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Working Capital
funds avaliable to firm for day - to - day operations
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Working Capital calculation
Current assets - Current Liabilities
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What 2 factors does liquidity measure
1) ability for a firm to meet short - term debts and 2) the ability of a business to turn its assets into cash
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Liquid assets
Easy to covert to cash
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Non- liquid
Harder to covert to cash
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Causes to depreciation
1) wear and tear, 2) Obsolescence - more efficient model replaces old machinery, 3) Time
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Income Statement
Accounting statement that shows from's sales revenue generated over a trading period and all costs incurred in earning that revenue
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Gross profit
Measures difference between sales rev. and the cost of producing products that have been sold
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Gross profit calculation
Sales rev - cost of goods sold
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Operating profit
When gross profit is calculated u then need to take off other expenses and overheads
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Operating profit calc.
Gross profit - operating expenses
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Fiance income
Interest business recieves on accounts that it holds with banks
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Finance expenses
Interest a business pays on its loans
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Profit before and after taxation
Companies pay corporation tax on profits. Tax is then deducted to give profit after tax for the year
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Profit quality
Whether a profit source will continue or not
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2 main ways to use profit
Retained profit = share of profit kept by company and Distributed profits = profits shared out to external parties, owners and partners
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Why is it important to make comparisons
See performance of previous years and Performance of similar business
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Window dressing is
Presenting a companies accounts in a way that enhances the financial position of the company
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Other cards in this set

Card 2


What does a Balance sheet list


The assets that firm owns and sets these against the balancing liabilities

Card 3


Non-current assets


Preview of the front of card 3

Card 4


Current assets


Preview of the front of card 4

Card 5


Shareholders equity


Preview of the front of card 5
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