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Assumptions in financial performance analysis, allowed or not?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBL Exams › Assumptions in financial performance analysis, allowed or not?

  • This topic has 3 replies, 2 voices, and was last updated 8 months ago by Ken Garrett.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • May 28, 2022 at 3:56 pm #656732
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    Sir when doing financial performance analysis for BOD/CEO, can I ASSUME certain things?

    Like say income from cafe business has increased(with case study providing no reasoning , as to why) then can I say that:

    “this could be because cafe has improvised the menu or enhanced customer experience by better staff training”

    Or I am not allowed to assume things, which are not directly given in the case study?

    Sir this is a very important doubt….

    May 28, 2022 at 5:32 pm #656737
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    In BCO S/D 2020 suggested answer, despite senior finance manager being an internal party to the company uses words such as “the rise in animal support costs MAY BE due to inflationary pressure” , “cost form commercial operations has fallen MAY BE due to fewer properties to manage (we sold a property in 20X1) or it could be because we have managed our shop and cafe more efficiently”

    So can we do this too? Stating possible reasons, even if not directly mentioned in the case study?

    Sir can I please request you to not lock this question, please? I feel its very important for my understanding

    May 28, 2022 at 5:41 pm #656739
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10198
    • ☆☆☆☆☆

    I would not postulate causes or make assumptions without some evidence from the question (unless you seem to be required to do that). It would be be better to say that it is not clear why income has increased, but be sure there are no clues in the question.

    May 28, 2022 at 5:52 pm #656740
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10198
    • ☆☆☆☆☆

    S/D 2020 If the CFO does not know the cause of cost changes then the CFO is a fool and using the word ‘may’ simply draws attention to that. Better to say that the causes still need to be determined.

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