I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART H: INTERPRETATION OF FINANCIAL STATEMENTS 

 

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C H A P T E R 

 

TOPIC LIST 

SYLLABUS 

REFERENCE 

1  Information required by users 

H1(a),(b)

2  The broad categories of ratios   

H2(a),(b), H3(a),(b)

3 Profitability 

and 

return 

H2(a),(b), H3(a),(b)

4  Liquidity, gearing/leverage and working capital 

H2(a),(b), H3(a),(b)

5 Interpreting 

information 

H3(a),(b)

6  Limitations of ratio analysis 

H3(a),(b)

 

 

Interpretation of 

financial statements

If you were to look at a statement of financial position or statement 

of profit or loss, how would you decide whether the company was 

doing well or badly? Or whether it was financially strong or 

financially vulnerable? And what would you be looking at in the 

figures to help you to make your judgement? 

The FFA/FA syllabus requires you to understand the importance 

and purpose of the interpretation and analysis of financial 

statements. It also requires you to be able to analyse financial 

statements, calculate key accounting ratios and draw conclusions 

about the information you are provided with.  

Ratio analysis involves comparing one figure against another to 

produce a ratio, and assessing whether the ratio indicates a 

weakness or strength in the company's affairs, and is the main 

focus of this chapter. 

 

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