3: Using financial data to measure and assess performance Flashcards
(23 cards)
Income statement
A financia document that summarises a businesse’s trading activity and expenses to show whether it has made a profit or a loss.
Gross profit
Profit after cost of sales has been deducted
Operating profit
Profit after all other expenses have been deducted, also referred to as net profit.
Gross profit margin
Gross profit expressed as a percentage of sales revenue
Operating profit margin
Operating profit expressed as a percentage of sales revenue.
Profit quality
The sustainability of profit.
Profit utilisation
How profit is being used, i.e. whether it is being ploughed back into the business or distributed to shareholders.
Balance sheet
A financial document that summaries the net worth of a business - it balances total assets with total equity and liabilities.
Inventories
the IFRS term for stocks.
Total equity
The total amount of money being utilised in the business from share capital and retained profit.
Non-current assets (fixed assets)
Items of value owned by the business that are likely to be kept for more than one year.
Current assets
Resource owned by the business whose value varies as a result of daily business activities, e.g. cash, inventories.
Intangible assets
Purchased items without physical form such as goodwill or brand names.
Current liabilities
Financial obligations of the business payable within 12 months.
Non-current liabilities (long-term liabilities)
Debts that the business has more than one year to repay.
Net current liabilities
Current liabilities plus current assets (do not forget that current liabilities are a negative figure and shown in () on the balance sheet.
Net assets
Total assets - total liabilities (also obtained by non-current assets plus net current liabilities - mob-current liabilities.)
Working capital
A measure of a firm’s ability to meet day-to-day expenses.
Depreciation
An accounting practice which allows the value of a fixed asset to be spread over its useful life.
Trade receivables
Amount owed by debtors to the business
Debtor
Someone who owes the business money, i.e. a customer who has not yet paid.
Trade payables
Amounts owed by the business to creditors.
Creditor
Someone the business owes money to, i.e. a suppler who has not yet been paid.
