Chapter 10
Accounting for Non-accounting Students · 14 exercises
Problem 1
What is meant by the term 'interpretation of accounts'?
5 step solution
Problem 2
Give three reasons why the absolute data shown in financial accounts may need to be interpreted.
3 step solution
Problem 4
What is the difference between (a) horizontal analysis and (b) trend analysis?
3 step solution
Problem 5
What is vertical analysis?
4 step solution
Problem 6
What is (a) a ratio and (b) ratio analysis?
2 step solution
Problem 7
What five main categories may be used for classifying accounting ratios?
6 step solution
Problem 8
What does 'ROCE' mean and how may it be calculated?
5 step solution
Problem 9
What is the difference between the gross profit ratio and operating profit ratio?
3 step solution
Problem 10
Why might it be misleading to compare the net profit ratio of one entity with that of another entity?
6 step solution
Problem 11
Why is liquidity important and which ratios may be used for assessing it?
5 step solution
Problem 12
What is meant by 'EPS' and where might you find it in a set of published accounts?
3 step solution
Problem 13
What is capital gearing and how might it be calculated?
5 step solution
Problem 14
What is a possible link between the following types of ratios: (a) profitability and efficiency; (b) profitability and liquidity; (c) profitability and investment (d) efficiency and liquidity?
5 step solution
Problem 15
Outline the main steps you would take if you were asked to appraise the financial performance of a company using its annual report and accounts.
7 step solution