Self-study 20. Task Read the text and write the definitions of the words in bold. Preparation of the accounts

cash account may refer to a ledger in which all cash transactions are recorded
income statement a financial statement that shows you the company's income and expenditures
annual report a company's yearly report to shareholders, documenting its activities and finances in the previous financial year.
potential shareholders the Sponsor, the Directors and officers of the Company or their respective affiliates who hold shares prior to the IPO
Task 2.
Ex.1 Put the words into the correct column.
accounts payable cost of goods sold ledger
shareholders' equity EBITDA trial balance invoices
operating expenses current assets

Preparation of accounts	Profit and loss account	Balance sheet
accounts payable	cost of goods sold	trial balance
invoices	operating expenses	EBITDA
ledger	current assets	shareholders' equity

Ex.2 Put the solutions for managing cash flow 1-6 into the correct category below.

1. 
   just-in-time manufacturing
   
2. 
   making payments to suppliers in instalments (= part payments)
   
3. 
   leasing fixed assets rather than buying them
   
4. 
   offering a discount for early settlement (= complete payment) of a bill
   
5. 
   improving sales forecasting so that the warehouse holds less inventory
   
6. 
   cancelling the office Christmas party
   

Credit control: 2, 4
Stock control: 5, 1
Expenditure control: 3, 6
Task 3. Match the definitions 1-4 with the examples of financial ratios a)-f) below.

1. 
   Liquidity ratios: these measure ability to turn assets into cash to pay short-term debts. c
   
2. 
   Profitability ratios: these measure ability to generate profits. B, d, f
   
3. 
   Leverage (Debt) ratios: these measure the degree to which a company relies on borrowed funds. a
   
4. 
   Activity ratios: these measure the effectiveness of the use of resources from an operational point of view. e
   

1. 
   Debt to owners' equity = Total liabilities / Total owners' equity
   
2. 
   Net profit margin = Net income before taxes / Net sales
   
3. 
   Working capital = Current assets / Current liabilities
   
4. 
   Return on equity = Net income after tax / Total owners' equity
   
5. 
   Inventory turnover = Cost of goods sold / Average inventory (mid point between inventory at beginning and ending of accounting period)
   
6. 
   Earnings per share = Net income after taxes / Number of shares issued