Flashcards on IGCSE Accounting Analysis and Interpretation
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What is the purpose of financial analysis?
The purpose of financial analysis is to assess the financial health and performance of a company by examining its financial statements.
What are the main financial statements used in accounting analysis?
The main financial statements used in accounting analysis are the income statement, balance sheet, and cash flow statement.
What is ratio analysis?
Ratio analysis is a method used to evaluate a company's financial performance by analyzing the relationships between different financial variables.
What are the different categories of financial ratios?
The different categories of financial ratios include profitability ratios, liquidity ratios, solvency ratios, and efficiency ratios.
What is the formula to calculate the current ratio?
The formula to calculate the current ratio is Current Assets / Current Liabilities.
How can trend analysis be used in accounting?
Trend analysis can be used in accounting to identify patterns and changes over time in financial data, helping to assess the company's performance and identify potential risks.
What is the purpose of vertical analysis?
The purpose of vertical analysis is to determine the relative proportions of each item in a financial statement and assess their significance.
What is the formula to calculate return on equity (ROE)?
The formula to calculate return on equity (ROE) is Net Income / Shareholders' Equity.
Explain the concept of working capital.
Working capital is the difference between a company's current assets and current liabilities and represents the amount of liquid assets available to fund day-to-day operations.
What is the purpose of horizontal analysis?
The purpose of horizontal analysis is to compare financial data over multiple periods to identify trends and changes.
What is the formula to calculate earnings per share (EPS)?
The formula to calculate earnings per share (EPS) is Net Income / Average Number of Shares Outstanding.
What is the significance of cash flow analysis?
Cash flow analysis helps in assessing the company's ability to generate cash and meet its short-term obligations and invest in future growth.
What is the formula to calculate gross profit margin?
The formula to calculate gross profit margin is (Revenue - Cost of Goods Sold) / Revenue.
How can common-sized financial statements be useful in analysis?
Common-sized financial statements can be useful in analysis by comparing the relative proportions of different items across multiple periods or companies.
What is the formula to calculate asset turnover ratio?
The formula to calculate asset turnover ratio is Revenue / Average Total Assets.
What is the role of financial analysis in decision making?
Financial analysis provides crucial information and insights for decision making, such as evaluating investment opportunities, assessing creditworthiness, and monitoring financial performance.
What is the purpose of financial analysis?
The purpose of financial analysis is to assess the financial health and performance of a company by examining its financial statements.
What are the main financial statements used in accounting analysis?
The main financial statements used in accounting analysis are the income statement, balance sheet, and cash flow statement.
What is ratio analysis?
Ratio analysis is a method used to evaluate a company's financial performance by analyzing the relationships between different financial variables.
What are the different categories of financial ratios?
The different categories of financial ratios include profitability ratios, liquidity ratios, solvency ratios, and efficiency ratios.
What is the formula to calculate the current ratio?
The formula to calculate the current ratio is Current Assets / Current Liabilities.
How can trend analysis be used in accounting?
Trend analysis can be used in accounting to identify patterns and changes over time in financial data, helping to assess the company's performance and identify potential risks.
What is the purpose of vertical analysis?
The purpose of vertical analysis is to determine the relative proportions of each item in a financial statement and assess their significance.
What is the formula to calculate return on equity (ROE)?
The formula to calculate return on equity (ROE) is Net Income / Shareholders' Equity.
Explain the concept of working capital.
Working capital is the difference between a company's current assets and current liabilities and represents the amount of liquid assets available to fund day-to-day operations.
What is the purpose of horizontal analysis?
The purpose of horizontal analysis is to compare financial data over multiple periods to identify trends and changes.
What is the formula to calculate earnings per share (EPS)?
The formula to calculate earnings per share (EPS) is Net Income / Average Number of Shares Outstanding.
What is the significance of cash flow analysis?
Cash flow analysis helps in assessing the company's ability to generate cash and meet its short-term obligations and invest in future growth.
What is the formula to calculate gross profit margin?
The formula to calculate gross profit margin is (Revenue - Cost of Goods Sold) / Revenue.
How can common-sized financial statements be useful in analysis?
Common-sized financial statements can be useful in analysis by comparing the relative proportions of different items across multiple periods or companies.
What is the formula to calculate asset turnover ratio?
The formula to calculate asset turnover ratio is Revenue / Average Total Assets.
What is the role of financial analysis in decision making?
Financial analysis provides crucial information and insights for decision making, such as evaluating investment opportunities, assessing creditworthiness, and monitoring financial performance.