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Analysis and interpretation


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This presentation is to introduce year 11 accounting students to the notion of interpretation and analysis of financial resuslts. It is in simplistic form.

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Analysis and interpretation

  1. 1. Analysis and Interpretation<br />Analysis means to break down something complex into workable segments<br />$ $ $ $ $ $ $ $<br />
  2. 2. Why analyse and interpret?<br />
  3. 3. Lambdown Farms Profit and Loss Statement<br />Revenue<br />Cash sales 100000<br />less cost of goods sold<br />cost of sales 60000<br />cartage in 1000<br /> gross profit 39000<br />Less stock loss 1000<br /> adjusted gross profit 38000<br />Less Expenses<br />wages 20000<br />insurance 900<br />interest expenses 1000<br /> depreciation of delivery van 3000 24900<br /> net profit 13100<br />
  4. 4. Lambdown Farms<br />Fat lamb sales $30000<br />
  5. 5. Shepton Farm<br />Fat lamb sales $60000<br />
  6. 6. Which farm is doing better?<br />Shepton Farms<br />Lambdown Farms<br />
  7. 7. Sales Analysis<br />Dollar changes<br />Percentage changes<br />Sales Index<br />Budget targets<br />Graphs and Charts<br />
  8. 8. Which cash receipts = revenue?<br />Capital contribution<br />Loans taken out<br />Cash sales<br />Collections from debtors<br />Interest recieved on investment<br />
  9. 9. Which cash payments do not = expenses<br />Drawings<br />Loan Repayments<br />Rent<br />Advertising<br />Payments to creditors<br />Cash purchases of non-current assets<br />Office expenses<br />
  10. 10. Which expenses are not cash payments?<br />Rent<br />Depreciation of non-current assets<br />Cost of sales<br />Advertising<br />Stock losses<br />Drenches<br />
  11. 11. What is a markup?<br />
  12. 12. Nursery Stores<br />Cost price of plants = $3 (50% markup)<br />Cost of Wheelbarrows = $30 (30%markup)<br />Cost of Bunches of flowers =$3 (100% markup)<br />
  13. 13. Other ratios<br />Gross profit ratios<br />Net profit ratio<br />Return on owner’s investment<br />Stock turnover rate<br />Debtors turnover ratio<br />Cash cycle<br />Liquidity ratios<br />The gearing ratio<br />
  14. 14. Non-financial analysis<br />Independence<br />Better life style<br />Hours of work<br />Development of products<br />Increasing market share<br />Staff development and growth<br />