Interpretation of Financial Statements part a

In this lecture we will look at Interpretation of Financial Statements

Financial statements are prepared to assist users in making decisions. They therefore need
interpreting, and the calculation of various ratios makes it easier to compare the state of a company
with previous years and with other companies.

We will look at Interpretation of Financial Statements and the various ratios that you should learn. We will work through an example to illustrate the various ratios.

 View all ACCA F3 / FIA FFA lectures >> This ACCA F3 / FIA FFA lecture is based on OpenTuition course notes, view or download here>>

Comments

• says

If you mean Paper F3 topics, then go to the main F3 page and you will find a link to all of the lectures (and to the free Course Notes that are used in the lectures).

• says

I mean of papers not topics!

• says

We have lectures and notes for all of the ACCA papers.
If you look at the home page and choose the ACCA link, then you will find links to them.

• says

He/She is trying to ask what are the papers that you teach

1. says

hi john, i read Examiner’s report
F3/FFA Financial Accounting
June 2012
Extracts from the financial statements of Miller Co are shown below:
31 May 2012
\$000
Revenue 475
Cost of sales (342)
Gross profit 133
Expenses (59)
Finance cost (26)
Profit before tax 48

What is the interest cover ratio for the year ended 31 May 2012?
A 2.85
B 1.85
C 5.12
The answer is:
Profit before interest and tax (133-59) = 2.85 (Answer option A)
Finance cost 26

can you explane me? I couldn’t understand..

• says

Nita, this is probably too late for you now, but you should ask questions like this in the Ask the Tutor forum.
It is not possible for us to read every comment under every lecture!

Interest cover is profit before interest and tax divided by the interest.
The profit before interest and tax is 133-59 = 74
The interest (finance cost) is 26.

So the interest cover is 74/26 = 2.85

2. says

Hi, what type of ratio is the Debt Ratio? and what exactly is the Debt ratio measuring.

3. says

you are great sir… you are awsome.. but i want to ask u something irrelevent to lecture.. but important and that is only the females students (e.g leega.. areena etc.) in ur live lecture class… no boy… why ??? haha..

• says

how can i attend ur live lectures? r u like teaching in some sort of colleges ?

4. says

I have read in a text book the formula for Asset turnover as revenue/total assets. Is this correct? It gives me a different answer.

• says

For asset turnover look at revenue / (total assets – current liabilities), which is the same as revenue / (share capital + non-current liabilities).

An alternative is to look at the fixed asset turnover (or non-current asset turnover), which is revenue / non-current assets.

It depends what the question asks for – if they want asset turnover then it is as per the first sentence of this reply (and as per the course notes)

5. says

I don’t understand why you use PBIT in calculating Net Profit Margin ?PBIT is similar to Operating Profit, so it seems like you calculate Operating Profit Margin. Also Net Profit is profit available for shareholders and PBIT is not fully available for shareholders. Maybe its because of syllabus of ACCA, please, could you explain?

• says

Although for financial accounts, the net profit is the profit available for shareholders, here we are trying to measure how well the business is being run. So for these purposes , we treat net profit as being the net operating profit (before tax and interest). The tax depends on the state policy and the interest depends on how the company is financed. It is the net operating profit that measures how well the managers are running the business.

• says

@admin, thank you … plus would it be possible for you guys to have special videos that peopl could download especialy for those who dont have access to internet all the time .

6. says

The addition of 5255 plus 1200 is 6455 therefore the ROCE is 1869/6455 is 28.95%.

• says

The lectures are not downloadable and can only be watched online. It is the only way that we can keep this website free of charge.

Using Safari will not make them downloadable!!!!

• says

but today when i tried to stream ur lecture by safari browser it downloaded it!!! 😀
BTW sir john i like the way u teach!!!