1. Using financial data to measure and assess performance

2. Company accounts Balance sheet Income statement

3. An account showing the income and expenditure of a firm over a period of time. http://www.bized.co.uk/cgi- bin/ratios/ratiodata.plhttp://www.bized.co.uk/cgi- bin/ratios/ratiodata.pl

4. Balance sheet A document describing the financial position of a company at a particular point in time, by comparing the items owned by the organisation with the amounts that it owes. http://www.bized.co.uk/cgi- bin/ratios/ratiodata.plhttp://www.bized.co.uk/cgi- bin/ratios/ratiodata.pl

5. Purposes and users of company accounts

6. Internal users UsersPurpose ManagersRecord financial activities, control resources, evaluate decisions EmployersAssess security of employment Owners and investorsCompare investment with other alternatives

7. External users GovernmentMet legal requirements and paid tax CompetitorsCompare performance SuppliersFinancial situation CustomersAfter sales service Local communityEmployment and wealth creation

8. Analysing balance sheets Used to asses overall worth of a business Lists the resources a business owns (assets) and the amounts it owes to others (liabilities) Shows the equity (capital) provided by the owners

9. Elements of the balance sheet

10. Assets Non current assets (machinery, premises) Current assets (stock, receivables) Tangible assets (physically exist) Intangible assets (no physical presence eg. Branding)

11. Liabilities Non – current liabilities – mortgage, loan Current liabilities – payables (creditors)

12. Capital Share capital Reserves and retained earnings

13. Purposes of the balance sheet Recognising the scale of the business Calculating the net assets of a business Gaining an understanding of the nature of the firm Identifying the companies liquidity position Showing sources of capital Recognising the significance of changes over time

14. Capital expenditure, revenue expenditure and depreciation

15. Revenue expenditure Spending on day to day items. Materials Stock Wages utilities

16. Capital expenditure Spending on fixed assets Buildings Machinery Vehicles

17. Depreciation The fall in value of an asset over time, reflecting the wear and tear of the asset as it becomes older.

18. Working capital (net current assets) Current assets – current liabilities Provides an indication of a firms scope to pay its short term debts

19. Factors influencing the level of working capital

20. Time taken to sell stocks Nature of the product Durability of the product Efficiency of suppliers Lead time Customer expectations competition

21. Time taken by customers to pay for goods Nature of the market Type of product Bargaining power

22. Credit period offered by suppliers

23. Causes of working capital difficulties Failure to control inventory levels Poor control of receivables Poor control of payables Cash – flow problems Poor internal planning and coordination External factors

24. Solving working capital problems Inventory control Receivables control

25. Analysing income statements

26. What is an income statement? Describes the income and expenditure of a business over a period of time. Shows the profit or loss made by the business. Profit/loss is difference between icome and costs.

27. Purposes of the income statement Review progress Shareholders can asses whether investment is beneficial Quality profit? Satisfy legal requirements Comparisons can be made

28. Structure of the income statement Revenue and cost of sales Expenses/operating costs Finance income and expenses Tax paid on profits made

29. Section 1 Enables firm to see how efficiently it is turning materials into sales revenue

30. Section 2 How efficiently is business controlling expenses?

31. Section 3 Gives an indication of how much a business borrows and lends money.

32. Profit quality A measure of whether profit is sustainable in the long run.

33. Profit utilisation Dividends to shareholders Retained profits

34. Using financial data for comparisons, trend analysis and decision making Inter firm comparisons Intra firm comparisons Comparisons to a standard Comparisons over time: trend analysis

35. Assessing strengths and weaknesses of financial data in judging performance

36. Strengths Easily interpreted Accounts have to conform to international standards Easy to compare Must be checked by independent auditors Stakeholders expect regular data

37. Weaknesses IFRS rules do not cover Ltd’s Some valuations are partially subjective Different accounting methods may be employed Accounts show what has happened rather than why