Test yourself

TASK 1. Answer the following questions.

1. What is the main purpose of a business?

2. What statements are prepared to learn financial picture of a company?

3. What does the year-end profit include as a rule?

4. When does a firm operate profitably?

5. What frequency of preparing the profit and loss statement is recommended?

6. Is the income account a statement, which helps a manager to plan his business development?

7. How can a manager improve the financial situation with the help of the income statement?

8. What expenses can be varied to get better results in business operating?

9. What is the break-even point?

10. What do costs of sales include?

11 .What do manufacturing costs include?

TASK 2. You've got some problems in your business. Say what actions you need to undertake if:

1. Sales are lower than that of successful firms in your line of business.

2. The cost of goods sold is rather high.

3. Your business has unsaleable products.

4. Your business has stockouts.

5. You've learnt that operating costs of your business are similar to those of efficient firms. Will you feel calm and safe or... ?

6. Your business is in the red.

7. Your manufacturing costs are too high.

UNIT 3

Accounting ratios

Objectives:

After studying this Unit you should be able to:

• Give the definition of accounting ratios

• Analyze ratios of financial statements

• Understand and explain their performance

Vocabulary

acid test /liquid ratio	коэффициент быстроты покрытия ликвидными активами, коэффициент ликвидности, отношение ликвидности фирмы к сумме долговых обязательств
allocate v	ассигновать; назначать (to); размещать, локализовать; располагать в определенном месте
appreciation n	оценка
assess v	оценивать
assessment n	оценка, определение ценности, определение стоимости
attempt v	пытаться, стараться, стремиться, прилагать усилия, пробовать, делать попытку

Centre for Interfirm Comparison	Цетр Межфирменного сравнительного анализа
clue n	ключ к разгадке чего-либо;
comparison n	сличение, сопоставление, сравнение
compile v	выбирать информацию, собирать материал (из разных источников), составлять
comply v	делать уступки, выполнять, осуществлять, исполнять (просьбу, приказание и т.д.)
crunch v	кризисная ситуация
current ratio	коэффициент ликвидности, коэффициент покрытия (в анализе баланса)
debentures n	1) долговое обязательство, долговая расписка
- debenture bond - debenture stock	2) облигация акционерного общества, компании
debtor collection period	период инкассации; период погашения покупательской задолженности (при продаже товаров в кредит); срок между предъявлением счета и его оплатой должником
designate v	указывать, обозначать; показывать; определять
disguise v	искажать; представлять в ложном свете (о фактах, событиях, информации и т.д.), утаивать, скрывать (with)
dividend yield	доходность акции (отношение суммы дивидендов по акции за год к ее текущей рыночной стоимости)
efficiency n	производительность
gearing = leverage n	использование кредита для каких-либо финансовых сделок
grasp n	способность быстрого восприятия; понимание
gross profit margin	минимум, нижняя грань валовой прибыли
highlight v	выделять, отводить главное место; выдвигать на первый план

interest cover	обеспеченность процентов, обеспечение выплаты процентов
jot down v	кратко записать; бегло набросать
liquidity n	ликвидность
make sense of	иметь смысл
margin n	минимально допустимый или необходимый запас, резерв (времени, денег, средств и т. п.)
mark-up on cost	повышение цены (на товар),) надбавка к издержкам; наценка
net profit margin	минимум, нижняя грань чистой прибыли
outdated	устаревший
overall performance	1) общая характеристика 2) общий результат деятельности (фирм) или работы (предприятий), эффективность работы
overdraft n	превышение кредита
performance n	исполнение, выполнение; свершение
productivity n	продуктивность
profitability n	доходность, рентабельность
ratio n	отношение, пропорция; коэффициент
retained profit	нераспределенные прибыли
return on capital employed	доход на используемый капитал; прибыль на используемый капитал прибыль на собственный акционерный капитал; доходность капитала (акционеров)
split into v	разбивать на части
stock turnover	оборот акций; движение запасов
Syn : inventory turnover, merchandise turnover	оборачиваемость товарных запасов
tackle on v	пытаться переубедить
turnover n	оборот
vulnerability n	1) уязвимость 2) слабые места в системе

STARTER ACTIVITIES

So far we have concentrated on the mechanics of accounting — the way in which accounts are prepared and presented.

It is vital that the information contained in accounts is understood and used. There is little point in preparing them otherwise. We will consider the various groups of people who may use a company's accounts and the tools of analysis used to help them make sense of the figures in those accounts. It is very important to show how accounts are used in the business world and to understand what they mean.

Two ratios of financial statements, the balance sheet and the profit-and-loss statement, are necessary - and useful. But they are only a start toward understanding where you stand, where you 're going, and how you 're going to get there. If you are to get your money's worth out of them, you should study various relations between some figures they present.

TASK 1. Read the passages about accounting ratios and their users, give the definition of ratios and say who is interested in liquidity, efficiency and profitability of the company.

A. A number of indicators have been worked out to determine the value of your business. You need an appreciation of the relationship between two figures in the accounts. In many ways, these indicators or comparative measures are more useful for analysing your business operations than the dollar amounts. These measures are usually expressed as ratios. They provide clues for spotting trends in the direction of better or poorer performance. They also make it possible for you to compare your company's performance with the average performance of similar businesses. They are figures, which express the key relationships in a set of accounts by comparing one figure with another one.

B. There are some groups of people who could use accounts. For each group the main areas of the company's performance are identified in which they are interested.

Group Areas of interest

Employees Profitability - as basis for wage bargaining; it also may be of interest for job security.

Efficiency and productivity — the figures reflect employees efforts.'. Liquidity — can the company meet its debts and therefore are our jobs secure?

Shareholders Level of profits and dividend - has the company made sufficient profits to maintain or increase the dividend? Is the dividend a sufficient return for the shareholders' investment? Liquidity - has the company sufficient cash to pay the proposed dividend?

Management Everything, because the accounts reflect the performance of the management during the year. Specifically, the accounts may highlight areas of weakness in the company, which the management will need to tackle.