Interpretation – Knowsia

FR – Nov 2014 – L2 – Q2a – Regulatory Framework for Financial Reporting

Explain limitations of accounting ratios in financial statement interpretation for a non-accounting executive.

Question

A non-accountant friend of yours attended a seminar for non-accounting executives on the interpretation of financial statements.

Though he enjoyed the seminar, especially the aspect on the uses of accounting ratios, he strongly believes that they have their limitations.

Required: State and explain the limitations of ratios for the purpose of interpreting financial statements. (5 Marks)

Answer

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Tags: Analysis Limitations, Financial Ratios, Interpretation, Non-Accountant
Level: Level 2

Topic: Regulatory Framework for Financial Reporting
Series: NOV 2014

PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements

Analyze financial ratios for a hotel transitioning to a public-private partnership.

Question

National Hotel, an investment unit of the Ministry of Tourism and Environment, is fifty (50) years old. It has recently been restructured from a wholly-owned government hotel to a private/government partnership. However, being the largest hotel in the country and for security reasons, the government still retains 55% of its equity.

The board of directors has decided to reposition the hotel for better performance, needing external finances amounting to N180 million, consisting of a N100 million loan over ten years and an N80 million bank overdraft. All necessary supports have been provided by the government and private equity holders.

The summarized results for the last two financial years are as follows:

Income Statement

Year ended 30 September	2013 (N’000)	2014 (N’000)
Turnover	200,000	240,000
Cost of Sales	(150,000)	(184,000)
Gross Profit	50,000	56,000
Overhead Expenses	(10,000)	(12,000)
Profit before Tax	40,000	44,000

Statement of Financial Position

You have been engaged as a consultant to assist the hotel in preparing necessary documents and reports to achieve its objectives.

Required:
a. Calculate six relevant accounting ratios covering each of the two years: 2013 and 2014 in a tabular form. (12 Marks)

b. Interpret the result of the ratios calculated in (a) above to show the financial performance and position of the entity. (12 Marks)

c. Highlight four unfavorable factors about the hotel as revealed by your interpretation. (6 Marks)

Answer

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Tags: Financial Performance, Hotel Industry, Interpretation, Public-Private Partnership, Ratio Analysis
Level: Level 2

Topic: Public Sector Financial Statements
Series: MAY 2019

FR – Nov 2014 – L2 – Q2a – Regulatory Framework for Financial Reporting

Explain limitations of accounting ratios in financial statement interpretation for a non-accounting executive.

Question

A non-accountant friend of yours attended a seminar for non-accounting executives on the interpretation of financial statements.

Though he enjoyed the seminar, especially the aspect on the uses of accounting ratios, he strongly believes that they have their limitations.

Required: State and explain the limitations of ratios for the purpose of interpreting financial statements. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Analysis Limitations, Financial Ratios, Interpretation, Non-Accountant
Level: Level 2

Topic: Regulatory Framework for Financial Reporting
Series: NOV 2014

PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements

Analyze financial ratios for a hotel transitioning to a public-private partnership.

Question

The summarized results for the last two financial years are as follows:

Income Statement

Year ended 30 September	2013 (N’000)	2014 (N’000)
Turnover	200,000	240,000
Cost of Sales	(150,000)	(184,000)
Gross Profit	50,000	56,000
Overhead Expenses	(10,000)	(12,000)
Profit before Tax	40,000	44,000

Statement of Financial Position

You have been engaged as a consultant to assist the hotel in preparing necessary documents and reports to achieve its objectives.

Required:
a. Calculate six relevant accounting ratios covering each of the two years: 2013 and 2014 in a tabular form. (12 Marks)

b. Interpret the result of the ratios calculated in (a) above to show the financial performance and position of the entity. (12 Marks)

c. Highlight four unfavorable factors about the hotel as revealed by your interpretation. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Performance, Hotel Industry, Interpretation, Public-Private Partnership, Ratio Analysis
Level: Level 2

Topic: Public Sector Financial Statements
Series: MAY 2019

Question Tag: Interpretation

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FR – Nov 2014 – L2 – Q2a – Regulatory Framework for Financial Reporting

Explain limitations of accounting ratios in financial statement interpretation for a non-accounting executive.

PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements

Analyze financial ratios for a hotel transitioning to a public-private partnership.

FR – Nov 2014 – L2 – Q2a – Regulatory Framework for Financial Reporting

Explain limitations of accounting ratios in financial statement interpretation for a non-accounting executive.

PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements

Analyze financial ratios for a hotel transitioning to a public-private partnership.

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Question Tag: Interpretation

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FR – Nov 2014 – L2 – Q2a – Regulatory Framework for Financial Reporting

Explain limitations of accounting ratios in financial statement interpretation for a non-accounting executive.

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PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements

Analyze financial ratios for a hotel transitioning to a public-private partnership.

You're reporting an error for "PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements"

FR – Nov 2014 – L2 – Q2a – Regulatory Framework for Financial Reporting

Explain limitations of accounting ratios in financial statement interpretation for a non-accounting executive.

You're reporting an error for "FR – Nov 2014 – L2 – Q2a – Regulatory Framework for Financial Reporting"

PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements

Analyze financial ratios for a hotel transitioning to a public-private partnership.

You're reporting an error for "PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements"

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