Interpretation of Financial Statements
The financial statement that shows a business’s assets, liabilities, and equity.
A: What is the balance sheet (or statement of financial position)?
This profitability ratio is calculated as (Net profit ÷ Revenue) × 100.
A: What is net profit margin?
The percentage of employees leaving an organisation in a given time period.
A: What is labour turnover?
The financial statement that records revenues and expenses over a period of time.
A: What is the income statement (or profit and loss account)?
This ratio measures how easily a firm can pay short-term debts.
A: What is the current ratio (or liquidity ratio)?
Absenteeism is usually measured as a percentage of this.
A: What is working time lost?
Cash inflows and outflows are reported in this financial statement.
A: What is the cash flow statement?
The gearing ratio measures the proportion of finance coming from this source.
A: What is debt (or borrowed capital)?
A high level of employee productivity means that output per this unit is high.
A: What is worker (or employee)?
Non-current assets are expected to be used for more than this length of time.
A: What is one year?
This efficiency ratio measures how many times inventory is sold in a year.
A: What is inventory (or stock) turnover?
A business with motivated staff is more likely to gain this type of advantage.
A: What is a competitive advantage?
Depreciation is included in accounts to reflect this.
A: What is the fall in value of assets over time?
A limitation of ratio analysis is that it relies on these, which may not reflect future conditions.
A: What are historical figures (past data)?
A drawback of relying on human resource measures is that they may be influenced by these external factors.
A: What are economic conditions (or external environment factors)?