An in-depth look at accounting ratios, which are vital tools in financial statement analysis to assess a company's performance and position.
Adjusted Consolidated Segment Operating Income (ACSOI) is a non-GAAP financial metric used to assess the financial performance of a company by eliminating certain items that do not reflect its underlying operating performance.
The All-Inclusive Income Concept is a principle used in accounting to include all items of profit and loss in a statement to arrive at a figure of earnings. It is commonly used in the UK and the USA for a comprehensive view of an enterprise's financial performance.
Variance analysis in standard costing and budgetary control examining sub-variances to understand the causes of differences between budgeted and actual figures in financial performance.
An Annual General Meeting (AGM) is a mandatory yearly gathering of a company's interested shareholders to receive the annual report and elect the board of directors.
An annual report is a comprehensive document prepared by a company at the end of its financial year, which summarizes its financial performance, business activities, and strategic goals. It is intended for shareholders, stakeholders, and the general public.
An approach to management integrating both financial and non-financial performance measures into a comprehensive framework developed by Professors Kaplan and Norton.
An essential figure representing net profit after tax, utilized in financial performance metrics such as earnings per share.
A ratio for assessing the solvency of a company, calculated by dividing the cash flow from operations by the total liabilities. It indicates a company's ability to satisfy its debts.
The comparative amount refers to the financial figure reported in a previous period, which is used for comparison with the current period to assess performance and detect trends over time.
A Comprehensive Income Statement is a financial document that reports a company's total earnings, including those not realized in the income statement, such as unrealized gains and losses, allowing for a more inclusive picture of financial performance.
Cross-sectional analysis involves comparing the accounting ratios of one company with those of its peers to assess profitability, liquidity, and capital structure. This method helps in determining a company's performance relative to its competitors.
The date on which an accounting period ends and the accounts of a business are ruled off. It ensures the accuracy and integrity of financial statements, providing a true and fair view of the business's performance and position.
Departmental accounting involves the process of providing accounting information analyzed by department, allowing each department of an organization to function independently as a cost center, revenue center, or profit center. This enables department managers to assess their department's financial performance effectively.
An annual report by the directors of a company to its shareholders, which forms part of the accounts required to be filed with the Registrar of Companies under the Companies Act. It includes information on the company's activities, performance, future developments, and other crucial matters.
Earnings Per Share (EPS) represents a portion of a company's profit allocated to each outstanding share of its common stock. It is a significant factor in evaluating a company's profitability and its stock outlook.
EBITDA is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. It focuses on the earnings generated from the core business operations by excluding interest, taxes, depreciation, and amortization expenses.
Economic income is calculated by comparing the net present value of future cash flows at the beginning and end of a period. It measures the wealth generated by an entity's operations and can provide a more accurate reflection of financial performance than accounting income.
Economic Value Added (EVA) is a performance measure used to evaluate a company's economic profit, which represents the value added to a company by its activities within a given time period.
Economic Value Added (EVA) is a financial performance measure that calculates the value created beyond the required return on the company's capital. It is an indicator of reflecting a company's ability to generate profit while taking into account the opportunity cost of capital employed.
A financial report consists of a firm's financial statements that provide information about its financial performance and position over a specific period.
Form 10-Q is a quarterly report mandated by the United States Securities and Exchange Commission (SEC), providing a comprehensive overview of a company's financial performance for the quarter.
Funds from operations (FFO) is a financial performance metric primarily used by real estate investment trusts (REITs) to define the cash generated by their operations. It specifically excludes the depreciation and amortization that obscures the actual cash earnings of these types of entities. FFO is essential to assess a REIT’s capability to pay dividends to its shareholders.
A ratio of financial performance that calculates gross profit as a percentage of sales, serving as a critical measure of trading success in retailing companies.
A voluntary statement appearing in the annual accounts and report of some companies in which the main financial results are given for the previous five to ten years.
The income statement, also known as the profit and loss statement, provides a detailed summary of a company's revenues, expenses, and profits over a specific period of time. It offers crucial insights into the financial performance of a business.
Integrated Reporting (IR) is a holistic approach to corporate reporting that combines financial and non-financial performance information to provide a comprehensive view of an organization’s ability to create sustained value over the short, medium, and long term.
A comprehensive report detailing the cost of production in a manufacturing firm, prepared to assess the financial performance of the company's production activities.
The matching principle is a fundamental accounting concept that dictates pairing revenues with the costs that were incurred to generate those revenues. This ensures that a company's financial statements reflect a more accurate picture of its financial performance.
Net earnings, also known as net income, represent the total profit of a company after all expenses and taxes have been deducted from total revenue. It is a crucial indicator of profitability.
Net Present Value (NPV) is a method of determining whether the expected financial performance of a proposed investment promises to be adequate. It assesses the profitability of an investment by comparing the present value of future cash flows to the initial investment.
Net profit, also known as net margin or net profit margin, represents the amount of revenue that remains after all the expenses of an organization have been subtracted from its total sales. It is a crucial measure of a company's financial performance and profitability.
Net Profit Percentage, also known as the Net Margin Ratio, is a critical financial metric that measures a company's profitability by expressing net profit as a percentage of sales revenue.
Opening Stock represents the inventory held by an organization at the beginning of an accounting period, including raw materials, work in progress, and finished goods. It plays a crucial role in assessing the financial performance and stock levels of a company.
The Operating and Financial Review (OFR) provides a comprehensive overview of a company’s performance, financial condition, and future prospects, offering stakeholders detailed insights beyond standard financial statements.
The Operating and Financial Review (OFR) provides an overview where directors interpret financial statements and discuss the business's performance, covering both positive and negative aspects.
The Profit and Loss (P & L) account is a financial statement summarizing the revenues, costs, and expenses incurred during a specific period, typically a fiscal quarter or year.
Pretax earnings, also known as pretax profit or profit before tax (PBT), refer to a company's earnings before any federal or state income taxes have been deducted. It is a key measure of a company's financial performance and highlights the profit generated from its operations excluding tax-related expenses.
Price variance is a common term in cost accounting that represents the difference between the actual cost of acquiring an asset or service and the budgeted or standard cost. It highlights whether an organization is paying more or less than previously anticipated for a particular expense.
A price war occurs when competing companies reduce their prices in a bid to attract customers, often leading to reduced profits and potentially driving some businesses out of the market.
A Profit and Loss Statement (P&L) summarizes the revenues, costs, and expenses incurred by a company during an accounting period, offering a comprehensive view of its financial performance. Also known as an Income Statement, operating statement, statement of profit and loss, or income and expense statement.
A profit center is a segment of a business organization that is responsible for generating its own revenue and profitability, often operating autonomously within a larger entity.
Profit margin is a measure of profitability that calculates how much of every dollar earned by a company winds up as profit. It is critical for assessing the efficiency and performance of a company.
Return on Assets (ROA) is an accounting ratio that measures the amount of profit generated during an accounting period as a percentage of the assets held by a company. It provides insights into how efficiently a company is utilizing its assets to produce profit.
Return on Capital Employed (ROCE) is an accounting ratio that measures an organization's profitability and efficiency in using its capital. It is expressed as a percentage of profit relative to the capital employed.
Return on Equity (ROE) is a measure of financial performance, determined by dividing net income by shareholders' equity. ROE is an essential metric for evaluating a company's profitability and efficiency in generating profits from its equity.
ROI measures the gain or loss generated on an investment relative to the amount of money invested.
Return on Sales (ROS) is a key financial performance metric that calculates net pre-tax profits as a percentage of net sales, serving as a useful measure of overall operational efficiency compared with prior periods or other companies.
Revenue is the total income generated by an entity from its main operating activities. It is a key indicator of financial performance and forms the base upon which profit and loss are calculated.
Segment margin is a profitability measure used to evaluate the financial performance of a business segment, such as a division, territory, or product line. It equals segmental revenue minus related product costs and traceable operating expenses attributable to that segment.
The simple rate of return measures the profitability of an investment by dividing the total earnings (income and capital gains) by the original amount invested. It is a straightforward way to assess the financial performance of an investment without considering compounding effects.
Stakeholders are individuals or groups with an interest in an organization, such as shareholders, employees, suppliers, customers, and members of the community. Stakeholder theory seeks to incorporate the interests of all stakeholders in business activities and decisions.
A standard cost for the fixed and/or variable overhead of an operation derived from the standard time allowed for the performance of the operation or the production of a product and the standard overhead absorption rate per unit of time for that operation or product.
Total Revenue is the overall income generated by a company from its business activities, typically from the sale of goods and services, before any expenses are subtracted.
Total Standard Profit represents the difference between the sales at standard selling prices and the standard overhead cost of these sales. It is used to evaluate the performance of a business against its predefined cost and sales benchmarks.
Trend analysis involves evaluating the performance of a company or industry over a period using accounting ratios to identify patterns and forecast future performance.
Triple Bottom Line (TBL) accounting is an accounting framework that incorporates three dimensions of performance: social, environmental, and financial. TBL aims to evaluate a company's commitment to corporate social responsibility and sustainable growth.
A favorable reversal in the fortunes of a company, a market, or the economy at large. Stock market investors speculating that a poorly performing company is about to show a marked improvement in earnings might profit handsomely from its turnaround.
Turnover, also known as sales revenue, represents the total income generated by an organization from selling goods and services, excluding discounts and taxes, within a specified period.
Unfavourable variance, also known as adverse variance, indicates that actual financial performance is worse than the budgeted expectation, resulting in lower profits or higher costs than anticipated.
A value for money audit (VFM audit) is an audit of a government department, charity, or other non-profit organization to assess whether it is functioning efficiently and delivering value for the money it spends.
Understand the key concept of variable overhead efficiency variance within a standard costing system, and how it affects business financial performance.
Variance Analysis identifies the deviations in financial performance by analyzing the differences between planned financial outcomes and actual results, helping organizations make informed decisions and improve their operations.
