55thth Accounting Accounting

Analysis and Interpretation of Analysis and Interpretation of Financial Statements Financial Statements

Debentures Debentures

6% Debentures (2017/2018) - Debentures are long term loans. They will be repaid

in full during the years 2017/2018. They carry a fixed annual rate of interest of 6%.

7% Debentures (2016/2017):

Debentures are Long-term Loans. The fixed annual rate of interest is 7%.Loan must be paid

back in one lump sum during the year 2016/2017.

Intangible Assets Intangible Assets

Intangible Assets - These are assets that have real value but we cannot see.

Examples are patents and goodwill.

Ordinary DividendOrdinary Dividend

Ordinary Dividend - The part of the net profit paid out to the Ordinary Shareholders.

They are paid after the preference shareholders. The rate is decided by the Directors

Capital EmployedCapital Employed

Capital Employed This is the total amount invested in the business. It is made up of

Issued Share Capital plus reserves plus long-term liabilities.

Shareholders Funds:

The amount owed to the shareholders by the Company. It consists of the Issued Capital and

Reserves.

Depreciation:

This is the loss in value of a Fixed Asset during the year because of usage or the passage oftime. A business will decide on a suitable %.

Interest Paid:

This is the extra money paid back to the lender for the use of money borrowed from a Bank

Gearing Gearing

Also called Leverage refers to the capital Also called Leverage refers to the capital structure of a firm. There are two ways to structure of a firm. There are two ways to finance business – Debt Capital and finance business – Debt Capital and Equity Capital. Debt captial is borrowing Equity Capital. Debt captial is borrowing and preference shares and preference shares

Equity capital is ordinary shareholders Equity capital is ordinary shareholders funds which only receive a dividend if the funds which only receive a dividend if the firm can afford it.firm can afford it.

Liquid Assets Liquid Assets

Current Assets which are readily Current Assets which are readily convertible into cash. They comprise of convertible into cash. They comprise of bank, cash , debtors, short term bank, cash , debtors, short term investments.investments.

Dividends Dividends

Dividends is the portion of company profit Dividends is the portion of company profit given to shareholders. It is the return on given to shareholders. It is the return on their investment in the company. their investment in the company. Preference shareholders get a fixed return Preference shareholders get a fixed return and ordinary sharholders dividend and ordinary sharholders dividend depends on the level of profits available in depends on the level of profits available in any year. any year.

Shareholders fundsShareholders funds

Shareholders funds is the total investment Shareholders funds is the total investment by shareholders in a company. It is made by shareholders in a company. It is made up of issued share capital plus reserves.up of issued share capital plus reserves.

Memorandum of AssociationMemorandum of Association

A Memorandum of Association is a A Memorandum of Association is a document which governs a company’s document which governs a company’s dealings with the outside world. It states dealings with the outside world. It states the company name, its objects, its limited the company name, its objects, its limited liability and its authorised share capitalliability and its authorised share capital

Articles of Association Articles of Association

The Articles of Association is a document The Articles of Association is a document which governs the internal conditions of a which governs the internal conditions of a company. It states the rights of company. It states the rights of shareholders, the procedures for meetings shareholders, the procedures for meetings and any other internal regulations.and any other internal regulations.

8% Cumulative Preference Shares 8% Cumulative Preference Shares

This is a share entitled to a fixed return of This is a share entitled to a fixed return of 8% per anum. The return is payable 8% per anum. The return is payable before any payment to ordinary before any payment to ordinary shareholders. If dividends are unpaid, due shareholders. If dividends are unpaid, due to insufficient profits, the dividend is to insufficient profits, the dividend is carried forward or accumulated to a future carried forward or accumulated to a future date.date.