Accounting Principles

Question 1

Difference between P&L and balance sheet?

Answer 1

• P&L= Income, revenue, and expenses across a year
• Balance sheet= financial position on specific date, includes assets and owing’s

Question 2

What standards are you aware of?

Answer 2

• IFRS= set common rules so that all financial statements are consistent, transparent and comparable around the world
• UK GAAP= set by financial reporting council (the body of accounting standards for UK). Based on IFRS.

Question 3

What is a balance sheet?

Answer 3

• Balance sheet= financial position on specific date, includes assets and owing’s

Question 4

What is a profit and loss statement?

Answer 4

• P&L= Income, revenue, and expenses across a year

Question 5

How can a cash flow statement assist in determining a company’s financial strength?

Answer 5

• It outlines how much liquid capital a prospective tenant has and would be a good barometer of their ability to pay rent and satisfy their lease commitments.

Question 6

How do you assess the covenant strength of a tenant?

Answer 6

I am not qualified to review financial accounts professionaly and would advise my client to see professional advice, but:

I review company accounts and apply a profits test which is broadly that if they have enough liquid capital in their accounts to pay three years’ worth of rent, then they are of a good covenant strength
For my retained retail clients, I also look to see if they have any other stores or branches