Tiếng anh chuyên ngành kế toán bài 4 (tr47 64)

Unit 4: Financial analysis

FINANCIAL ANALYSIS
In this unit, we will learn language and knowledge related to main types
of financial analysis, the main characters of each type and some ratios
in analyzing financial statements.
Trong bài học này, chúng ta sẽ học về ngôn ngữ và kiến thức liên quan
tới các phương thức phân tích tài chính, đặc điểm của từng loại và các
chỉ số trong phân tích các báo cáo tài chính.

UNIT OBJECTIVES - MỤC TIÊU
• Provide students with the language and knowledge related to the work of financial analysis.
Cung cấp cho sinh viên vốn ngôn ngữ và kiến thức liên quan đến cơng việc phân tích
tài chính.
• Provide students with the language and method to write a classification essay.
Cung cấp cho học viên ngôn ngữ và phương pháp để viết một bài luận phân loại.
• At the end of this unit, students will be able to tell and write about main types of financial
analysis, the main characters of each type and some ratios in analyzing financial statements.
Sau khi kết thúc bài học này, sinh viên có thể nói và viết về các cách phân tích tài chính cơ
bản, những đặc điểm chính của từng loại và một số chỉ số trong phân tích báo cáo tài chính.
DURATION (9 periods) - THỜI LƯỢNG HỌC (9 TIẾT)

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Unit 4: Financial analysis

Match the terms or concepts in column A with their definitions in column B. The
suggested time to do this exercise is 10 minutes.

Column A

Column B

1

Business cycle

A

A detailed examination or report on financial
performance

2

Financial instrument

B

The difference between the price of goods paid by a
shopkeeper and the price paid by the customer

3

Financial statement
analysis

C

An amount of money received from sales of goods
minus the cost of manufacturing or buying them

4

Gross margin

D

The examination of two or more organizations that
produce similar goods or carry out the same stage of
the production process

5

Gross profit

E

Any stock, share, money, or other financial security

6

Horizontal analysis

F

Recurring fluctuations in economic activity consisting
of recession and recovery and growth and decline

7

Liquidity
Liquidity ratio

G

Having enough money to pay your debts; having an
excess of assets over liabilities

8

Net sales revenue

H

The examination based on the relationship between
two amounts determined by the number of times one
contains the other

9

Ratio analysis

I

The examination of a movement in a certain direction

10 Solvency
Solvency ratio

J

Finance of assets that are easily turned into cash
the relationship between the amount of money held
in cash and the total amount held in deposits and
investments

Trend analysis

K

The amount of money made from the sale of goods
minus the cost of producing, selling and distributing
them

L

The examination of two or more organizations that deal
with different stages in a production process

11

12 Vertical analysis

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Unit 4: Financial analysis

Text A: Read the text do exercise 2.1 and 2.2 below. The suggested time for
reading the text and completing the exercise is 30 minutes.

FINANCIAL ANALYSIS
Financial analysis

F

inancial statement analysis
is the process of examining
relationships among financial
statement elements and making
comparisons with relevant
information. It is a valuable tool
used by investors and creditors,
financial analysts, and others in
their decision-making rocesses
related to stocks, bonds, and
other financial instruments.
The goal in analyzing financial
statements is to assess past
performance and current
financial position and to make
predictions about the future
performance of a company.
Investors who buy stock
are primarily interested in a
company's profitability and
their prospects for earning a
return on their investment by
receiving dividends and/or
increasing the market value of

their stock holdings. Creditors
and investors who buy debt
securities, such as bonds, are
more interested in liquidity
and solvency: the company's
short-and long-run ability to
pay its debts. Financial analysts,
who frequently specialize in
following certain industries,
routinely assess the profitability,
liquidity, and solvency of
companies in order to make
recommendations about the

purchase or sale of securities, analyst may prefer to use a
such as stocks and bonds.
variation of horizontal analysis
Analysts can obtain useful called trend analysis. Trend
information by comparing a analysis involves calculating
company's most recent financial each year's financial statement
statements with its results in balances as percentages of the
previous years and with the first year, also known as the
results of other companies in base year. When expressed
the same industry. Three primary as percentages, the base year
types of financial statement figures are always 100 percent,
analysis are commonly known and percentage changes from
as horizontal analysis, vertical the base year can be determined.
analysis, and ratio analysis.

Vertical Analysis

W

Horizontal Analysis

W

hen an analyst compares
financial information for
two or more years for a single
company, the process is referred
to as horizontal analysis, since
the analyst is reading across the
page to compare any single line
item, such as sales revenues.
In addition to comparing dollar
amounts, the analyst computes
percentage changes from year
to year for all financial statement
balances, such as cash and
inventory. Alternatively, in
comparing financial statements
for a number of years, the

hen using vertical analysis,
the analyst calculates
each item on a single financial
statement as a percentage of a
total. The term vertical analysis
applies because each year's

figures are listed vertically on a
financial statement. The total
used by the analyst on the
income statement is net sales
revenue, while on the balance
sheet it is total assets. This
approach to financial statement
analysis, also known as component percentages, produces
common-size financial statements.
Common-size balance sheets and
income statements can be more
easily compared, whether
across the years for a single
company or across different
companies.

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Unit 4: Financial analysis

Ratio Analysis

R

atio analysis enables the
analyst to compare items
on a single financial statement
or to examine the relationships
between items on two financial

statements. After calculating
ratios for each year's financial
data, the analyst can then examine
trends for the company across
years. Since ratios adjust for
size, using this analytical tool
facilitates intercompany as well
as intracompany comparisons.
Ratios are often classified
using the following terms:
profitability ratios (also known
as operating ratios), liquidity
ratios, and solvency ratios.
Profitability ratios are gauge
of the company's operating
success for a given period
of time. Liquidity ratios are
measures of the short-term
ability of the company to pay its
debts when they come due and
to meet unexpected needs for
cash. Solvency ratios indicate
the ability of the company to
meet its long-term obligations
on a continuing basis and thus
to survive over a long period of

time. In judging how well on
a company is doing, analysts
typically compare a company's

ratios to industry statistics as well
as to its own past performance.
Financial statement analysis,
when used carefully, can produce meaningful insights about
a company's financial information and its prospects for the

future. However, the analyst
must be aware of certain
important considerations about
financial statements and the use
of these analytical tools. For
example, the dollar amounts for
many types of assets and other
financial statement items are
usually based on historical costs
and thus do not reflect replacement
costs or inflationary adjustments.
Furthermore, financial statements
contain estimates of numerous
items, such as warranty expenses
and uncollectible customer

balances. The meaning fulness
of ratios and percentages
depends on how well the
financial statement amounts
depict the company's situation.
Comparisons to industry
statistics or competitors' results
can be complicated because

companies may select different,
although equally acceptable,
methods of accounting for
inventories and other items.
Making meaningful comparisons
is also hampered when a company
or its competitors have widely
diversified operations.
he tools of financial
statement analysis, ratio
and percentage calculations,
are relatively easy to apply.
Understanding the content of
the financial statements, on the
other hand, is not a simple
task. Evaluating a company's
financial status, performance,
and prospects using analytical
tools requires skillful application
of the analyst's judgment.

T

Source: Text A: From Financial Statement Analysis, MARY BRADY GREENAWALT, />
2.1

According to the text, which of the following sentences are true (T) or false (F)

Questions
1. The purpose of analyzing the financial statements is only to make prediction

about the future performance of a company.
2. Financial analysts often specialize in assessing the performance of many different industries at the same time.
3. Trend analysis assesses the performance of a company in a year based on the
comparison between the figures of that year to that of the base year.
4. It is more difficult to compare common-size balance sheets and income sheets
either across the years or across different companies.
5. Liquidity ratios are measures of the company’s ability to pay its debts in a short term.
50

T/F


Unit 4: Financial analysis

2.2

Answer the following questions with your own words, based on the information
in the text

1. What is the importance of financial statement analysis?
……………...................................................................................................…..
2. What is the purpose of analyzing financial statements?
……………...................................................................................................…..
3. What do the financial analysts do?
……………...................................................................................................…..
4. How can financial analysts get useful information to make financial statements?
……………...................................................................................................…..
5. Why is it called Horizontal Analysis?
……………...................................................................................................…..
6. What is the character of ratio analysis?

……………...................................................................................................…..
7. In ratio analysis, how can analysts judge on the performance of a company?
……………...................................................................................................…..
Text B: Read the text and do exercise 2.3 and, 2.4. The suggested time for
reading the text and completing the exercises is 30 minutes

FINANCIAL RATIO ANALYSIS

F

inancial ratio analysis is the calculation and comparison of ratios which are derived
from the information in a company's financial statements. The level and historical trends
of these ratios can be used to make inferences about a company's financial condition, its
operations and attractiveness as an investment.

F

inancial ratios are calculated from one or more pieces
of information from a company's financial statements.
For example, the "gross margin" is the gross profit from
operations divided by the total sales or revenues of a
company, expressed in percentage terms. In isolation, a
financial ratio is a useless piece of information. In context,
however, a financial ratio can give a financial analyst an
excellent picture of a company's situation and the trends
that are developing.

A

ratio gains utility by comparison to other data and standards. Taking our example, a gross

profit margin for a company of 25% is meaningless by itself. If we know that this
company's competitors have profit margins of 10%, we know that it is more profitable than
its industry peers which are quite favourable. If we also know that the historical trend is upwards,
for example has been increasing steadily for the last few years, this would also be a favourable
sign that management is implementing effective business policies and strategies.
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Unit 4: Financial analysis

F

inancial ratio analysis groups the ratios into categories that tell us about different facets of
a company's finances and operations. An overview of some of the categories of ratios is
given below.
• Leverage Ratios which show the extent that debt is used in a company's capital structure.
• Liquidity Ratios which give a picture of a company's short term financial situation or
solvency.
• Operational Ratios which use turnover measures to show how efficient a company is in
its operations and use of assets.
• Profitability Ratios which use margin analysis and show the return on sales and capital
employed.
• Solvency Ratios which give a picture of a company's ability to generate cash flow and pay
it financial obligations.

I

t is imperative to note the importance of the proper
context for ratio analysis. Like computer programming,
financial ratio is governed by the GIGO law of "Garbage

In...Garbage Out!" A cross industry comparison of the
leverage of stable utility companies and cyclical mining
companies would be worse than useless. Examining a
cyclical company's profitability ratios over less than a full
commodity or business cycle would fail to give an accurate
long-term measure of profitability. Using historical data independent of fundamental changes
in a company's situation or prospects would predict very little about future trends. For
example, the historical ratios of a company that has undergone a merger or had a substantive
change in its technology or market position would tell very little about the prospects for this
company.

C

redit analysts, those interpreting the financial ratios from the prospects of a lender,
focus on the "downside" risk since they gain none of the upside from an improvement in
operations. They pay great attention to liquidity and leverage ratios to ascertain a company's
financial risk. Equity analysts look more to the operational and profitability ratios, to
determine the future profits that will accrue to the shareholder.

A

lthough financial ratio analysis is well-developed and the actual ratios are well-known,
practicing financial analysts often develop their own measures for particular industries
and even individual companies. Analysts will often differ drastically in their conclusions
from the same ratio analysis.
Source: From Financial Ratio Analysis, />
2.3

Answer the following questions by choosing the best choice

1. What does the phrase “in isolation” mean?
a. in particular

b. individually

c.in general

2. What does the phrase “in context” mean?
a. in combination
52

b. in general

c. in all


Unit 4: Financial analysis

3. What can be inferred from the example of the gross profit margin?
a. the ratios are especially useful by comparison to others
b. the ratios themselves can show a company’s financial performance
c. there’s no need to look at the historical trend when analyzing the ratios
4. What does the word “itself” in the sentence: “Taking our example, a gross profit margin
for a company of 25% is meaningless by itself” refer to?
a. a company

b. a gross profit margin

c. 25%

5. What’s the INCORRECT statement?
a. Historical data and fundamental changes should be used independently.
b. Credit analysts pay attention to liquidity and leverage ratios most of all.
c. Equity analysts are interested in the operational and profitability ratios.
2.4

Fill in the blanks with the words given below

average

compare

enables

indications

industry

problems

similar

successive

them

trends

Ratio Analysis (1) _________ the business owner/manager to spot trends in a business and
to (2) _______ its performance and condition with the (3) _________ performance of similar

businesses in the same (4) _________. To do this, compare your ratios with the average of
businesses (5) _________ to yours and compare your own ratios for several (6) _________
years, watching especially for any unfavorable (7) _________ that may be starting. Ratio
analysis may provide the all-important early warning (8) _________ that allow you to solve
your business (9) _________ before your business is destroyed by (10) _________.

3.1

Listening 1
Listen to a lecture about the financial ratio analysis and answer the following questions

1. What does ratio analysis provide?
……....................................................................……….
2. How is horizontal analysis used?
……....................................................................……….
3. What about vertical analysis?
……....................................................................……….
4. What does “it” in this sentence: “It indicates the existing relationship between sales and
each income statement account” refer to?
a. the horizontal analysis
b. the vertical analysis
c. the structure of the firm.
5. What are the two types of comparison in financial ratio analysis?
……....................................................................……….
6. What will the firm’s financial analyst do after completing the financial statement analysis?
……....................................................................……….
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Unit 4: Financial analysis

2.3

Listening 2
Listen to the lecture again and fill in the blanks

Industry comparison. The ratios of a firm are compared with those of (1) _______ firms or
with industry (2) ________ or norms to (3) _________ how the company is faring relative
to its (4) _________. Industry average ratios are (5) _________ from a number of (6)
_______, including: (a) Dun & Bradstreet. Dun & Bradstreet computes 14 ratios for each of
125 (7) _________________. They are published in Dun's Review and Key Business
Ratios. (b) Robert Morris Associates. This association of bank loan officers________(8)
_________ Annual Statement Studies. Sixteen ratios (9) __________ for more than 300 lines
of business, as well as a (10) ___________distribution of items on the (11) ____________
and (12) _____________________ (common size financial statements).
Trend analysis. A firm's present ratio is compared with its (13) ______ and expected (14)
_____ ratios to determine whether the company's (15) ____________________ is improving
or deteriorating over time.
After completing the financial statement analysis, the firm's financial analyst will consult with
management to discuss plans and prospects, any problem areas identified in the analysis,
and possible solutions.

4.1

Match the terms or expressions in column A with their definitions in column B.
The suggested time to do this exercise is 5 minutes
Column A

Column B

1. The current ratio (or working capital) measures
liquidity – i.e. having enough cash to meet
short-term obligations. It shows if a business
can pay its most urgent debts.

A

2. A company’s profit margin or return on sales
is the percentage difference between sales
income and the cost of sales.

B

3. Productivity shows the amount of work or
sales per employee.

C

Sales volume
__________________________
Number (or wages) of employees
(long-term) loan capital
__________________________
Shareholders’ equity or net assets
Current assets
_____________
Current liabilities

4. Earnings per share relates the company’s
profits to the number of ordinary shares it

has issued.

D

5. A company’s debt/ equity ratio compares the
amount of debt to the firm’s own capital.

E

Pre-tax profit
_____________

F

Owners’ equity
Pre-tax profit
___________

6. Return on equity shows profit compared to
shareholders’ capital.

Distributable profit
_______________
Number of shares

Sales
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Unit 4: Financial analysis

4.2

Choose the best alternative to complete each sentence. The suggested time to do
this exercise is 10 minutes

1. A company needs to raise a lot of money, it may ……….. shares.
a. put up

b. issue

c. supply

d. purchase

2. Pension ……….. play an important role in the stock market.
a. companies

b. trusts

c. societies

d. persuaded

3. As an ordinary shareholder, you are ……….. to vote at the meeting.
a. entitled

b. titled

c. nominated

d. persuaded

4. The share ……….., which is made up of a cross-section of shares, reflects the general
activity of the market.
a. indication

b. index

c. measure

d. indicator

5. A ……....….. is someone who buys shares, expecting the market to rise.
a. bear

b. bull

c. dog

d. stag

6. A ……....….. is a speculator who expects share prices to fall.
a. bear

b. bull

c. dog

d. stag

7. A ……..….. is a person who buys new issues of shares hoping to sell them quickly at
a profit.
a. bear

b. bull

c. dog

d. stag

8. I’ve put part of the money into an instant ……….. account.
a. access

b. excess

c. exit

d. entrance

9. Bonds issued by the government are often known as ………..
a. gelts

b. guilt’s

c. gilts

d. debits

10. What kind of ……….. can I expect on my investment?

a. reward

b. prize

c. surplus

d. return

11. You should have as diversified a ……….. of shares as possible.
a. case

b. file

c. portfolio

d. folder

12. In real ……….. the $1,000 you invested would be worth $5,000 today.
a. words

b. facts

c. factors

d. terms

13. The higher the risk you ……….. , the more money you could make.
a. take

b. do

c. make

d. invest

14. The market has been extremely ……….. over the past few years.
a. volatile

b. wavering

c. shocking

d. moving

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Unit 4: Financial analysis

5.1

Based on the information in the two texts above, answer the following questions
in your own words

1. What’s financial statement analysis?
……...................................................……………..
2. What’s the purpose of analyzing financial statements?
……...................................................……………..
3. How many types of financial statement analysis? What are they?
……...................................................……………..

4. Describe each type of financial statement analysis?
……...................................................……………..
5. What is financial ratio analysis?
……...................................................……………..
6. Give some examples of financial ratios and explain them.
……...................................................……………..
5.2

Discussion – Work in pairs or groups and discuss the following questions

1. Which particular skills and abilities among those below do you think a financial executive
needs?
Essential skills

Technical skills

team work skill

knowledge about finance

language skills

data analyzing skill

problem solving skill

maths

communication skills

…………………………….

……………………….

Can you name any other skills or characteristics important for a financial executive?
2. Do you think you possess the necessary skills?
3. If you have yet to choose a career, do you think it could be a financial executive? Why or
Why not?

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Unit 4: Financial analysis

6.1

Writing a classification essay

1. What is a classification essay?
In a classification essay, a writer organizes, or sorts, things into categories.
2. Three steps to effective classification:
Step 1: Sort things into useful categories.
Step 2: Make sure all the categories follow a single organizing principle.
Step 3: Give examples that fit into each category.
3. Finding categories
This is a key step in writing a classification essay. To classify, or sort, things in a logical
way, find the categories to put them into. For example, say you need to sort the stack of
papers on your desk. Before you would put them in random piles, you would decide what
useful categories might be: papers that can be thrown away; papers that need immediate
action; papers to read; papers to pass on to other coworkers; or papers to file.

4. Thesis statement of a classification essay
The thesis statement usually includes the topic and how it is classified. Sometimes the
categories are named.
(topic)...(how classified)...(category) (category) (category)
Ex: Tourists in Hawaii can enjoy three water sports: snorkeling, surfing, and sailing.
5. How to write an effective classification essay
A. Determine the categories. Be thorough; don't leave out a critical category. For example,
if you say water sports of Hawaii include snorkeling and sailing, but leave out surfing,
your essay would be incomplete because surfing is Hawaii's most famous water sports.
On the other hand, don't include too many categories, which will blur your
classification. For example, if your topic is sports shoes, and your organizing principle
is activity, you wouldn't include high heels with running and bowling shoes.
B. Classify by a single principle. Once you have categories, make sure that they fit into the same
organizing principle. The organizing principle is how you sort the groups. Do not allow a
different principle to pop up unexpectedly. For example, if your unifying principle is "touristoriented" water sports, don't use another unifying principle, such as "native water sports,"
which would have different categories: pearl diving, outrigger, or canoe racing.
C. Support equally each category with examples. In general, you should write the same
quantity, i.e., give the same number of examples, for each category. The most
important category, usually reserved for last, might require more elaboration.
6. Common classification transitions
• The first kind, the second kind, the third kind
• The first type, the second type, the third type
• The first group, the second group, the third group
6.3

Writing practice
How many types of financial analysis do you know? What are their characteristics?
Use the knowledge you have learned from this lesson and additional resources
to write an essay to answer this question. The suggested time for completing the
exercise is 45 minutes

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Unit 4: Financial analysis

English terms

B
- Base year
- Business cycle
C
- Credit analyst
D
- Debt security
F
- Financial instrument
- Financial statement analysis
G
- Gross margin
- Gross profit
H
- Horizontal analysis
L
- Liquidity
- Liquidity ratio
N
- Net sales revenue
O
- Operational ratio
P

- Profitability ratio
R
- Ratio analysis
S
- Solvency
- Solvency ratio
T
- Trend analysis
V
- Vertical analysis

58

Vietnamese equivalents

- Năm căn bản/ chuẩn/ gốc
- Chu kỳ kinh doanh
- Người/Chuyên viên phân tích tín dụng
- Chứng khốn nợ
- Cơng cụ tài chính (như chứng khốn, cổ phần, tiền…)
- Phân tích báo cáo tài chính
- Mức lãi gộp/ biên lãi gộp (bán hàng)
- Lợi nhuận gộp/ lãi mộc
- Phân tích theo chiều ngang
- Mức quay vịng vốn, khả năng thanh tốn, tính lỏng
- Tỷ suất thanh tốn, tỷ suất lưu động
- Doanh thu ròng
- Tỷ suất kinh doanh
- Tỷ suất (khả năng) sinh lợi
- Phân tích hệ số/ tỷ lệ

- Khả năng trả nợ
- Tỷ suất khả năng thanh tốn
- Phân tích xu hướng
- Phân tích theo chiều dọc


Revision A

REVISION A
UNIT OBJECTIVES - MỤC TIÊU
• Review the topics introduced in Unit 1, Unit 2, Unit 3 and Unit 4 through reading and
vocabulary exercises.
Ôn tập các chủ đề đã học ở bài 1, bài 2, bài 3 và bài 4 thông qua các bài đọc và từ vựng.

CONTENTS
1

Finance and Companies

1.1 Read the summary below and decide whether each of the following is assets or
liabilities and of what kind? Which three are not assets?

A. Assets
An asset is something that has value, or the power to earn money. These include:
• current assets : money in the bank, investments that can
easily be turned into money, money that customers owe,
stocks of goods that are going to be sold.
• fixed assets: equipment, machinery, buildings and land.
• intangible assets: things which you cannot see. For example,
goodwill: a company’s good reputation with existing

customers, and brands (see unit 22): established brands have
the power to earn money.
If a company is sold as a going concern, it has value as a
profit-making operation, or one that could make a profit.
B. Liabilities
Liabilities are company’s debts to supplier, lenders, the tax
authorities, etc. Debts that have to be paid within a year are
current liabilities, and those payable in more than a year are
long-term liabilities, for example bank loans.
1. Vans which a delivery company owns and uses to deliver
goods.
2. Vans for sale in a showroom.
3. A showroom owned by a company that sells vans.
4. A showroom rented by a company that sells cars.
5. A sum of money that a company has to pay its supplier in the next six months.
59


Revision A

6. Money which customers owe, that will definitely be paid in the next 60 days.
7. Money which a bankrupt customer owes, that will certainly never be paid.
8. The client list of a successful training company, all of which are successful businesses.
9. A five year loan from a commercial bank.
10. The client list of a training company, with names of clients that have all gone bankrupt.
1.2 Match the words or expressions in the column A with their definition in column B

Column A

Column B

1

A

The contract telling the terms, conditions and
purposes of a corporation.

2

Articles of Incorporation (n)

B

Separate unit for ownership or legal purpose

3

Bankrupt (adj)

C

Unable to pay one’s debts and legally releases
from the liability.

4

Board of Directors

D

A group of persons elected by stockholders to
run a corporation.

5

Dividend (n)

E

The contract telling the terms and conditions
of a partnership

6

Entity (n)

F

Business owned by two or more individuals

7

Expertise (n)

G

A share of the profits of a corporation which is
given to the stockholders.

8

Income tax (n)

H

Special knowledge or ability

9

Partnership (n)

I

One-owner business

10

Sole Proprietorship (n)

J

A tax which is based on the amount of money a
person or company receives for labor , services,
or products, and which cannot be added to the
price of the labor , services or products.

11

Turnover (n)

K

Sales revenue minus the cost of sales, before
deductions for administration expenses, interest
charges, etc.

12

Net profit

L

Sales revenue minus the cost of making
and selling the goods and deductions for
administration expenses, interest charges, etc

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Articles of Co-partnership (n)

Gross profit

M

The total amount of money a company
receives from selling goods or services.

Revision A

1.3 Decide which of the alternatives (A-H) each speaker is talking about. Write the
letter of your answer in the box at the end of the sentence. There are some
alternatives that you don’t have to use.

1. “We had to find a lender who was prepared to finance an
exciting new company.”
2. “Our lending to companies takes the from of conditional loans
or debentures.”
3. “If you do not keep up with the repayments, we may sell your
home to recover our money”.
4. “The company is highly geared so I wouldn’t invest in it.”
5. “We owe our supplier $12,000 and we have a loan of $8,000 so
the total is about $20,000.”
A. indebtedness

C share capital

D bond

E.
2

B equity
F gross profit

G

H collateral

leverage

venture capitalist

Accountancy

Choose a suitble word or phrase in the list to fill in each blank below
auditors

fair view

accounts

accountancy

accountant

window dressingthe

bookkeepers

Hi, I’m Fiona and I’m an (1)………….. I work in Edinburgh for one big accountancy firms.
We look at the financial records or (2)…………. of a lot of companies. We work with the
accountants of those companies, and the people who work under them:( 3) …………... I like
my profession (4) …………...
Sometimes we act as (5)………… : specialist outside accountants who audit a company’s
accounts, that is, we check them at the end of the particular period to see if they give a true
and (6)…………. (an accurate and complete picture). An audit can take several days, even

for a fairly small company.
When a company’s results are presented in a way that makes them look better than they
really are, even if it follows the rules, it may be accused of creative accounting or
(7)………….. Of course, I never do this!

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Revision A

3

Financial statement and analysis

3.1 Match the explanation in column A with its words in column B

Column B

Column A
1

A formal description of income and costs for a time
period that has finished

A

Balance sheet

2

A formal description of a company’s financial position
at a specified moment

B

Capital expenditure

3

Items of value which are not easily changed into
cash but which the business needs

C

Cash budget

4

Money made by the company, less all costs, but
before tax has been paid

D

Current assets

5

The person who is responsible for the financial side of
running a business

E

Dividends

6

Individuals who invest their money in a company
hope to regularly receive these

F

Finance director

7

A plan of cash income and cash spending for a specific
period of time

G

Financial advisor

8

Cash items, or items that can easily be changed into
cash for the present financial year

H

Fixed assets

9

Major spending on large items necessary for the
business, such as property or equipment

I

Pre-tax profit

10

Someone who advised people on how to manage their
financial affairs

J

Profit and loss report

3.2 Choose the most suitable answers for the following questions

1. The money raised from several international banks will help __________ the airline's move
to a new airport.
a. finance
b. price
c. subsidise
d. compensate
2. The car company is going to ________ $220m in its production plan next year in order to
double output.
a. invest

b. fund
c. deposit
d. advance
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Revision A

3. The company was unable to pay its debts and was therefore declared ________.
a. bankrupt

b. written off

c. uneconomic

d. indebted

4. The bank has agreed a/an ____ of $1m to finance the purchase of the new building.
a. allowance

b. loan

c. accommodation

d. advance

5. Last year they made a big profit from ________ of their new product range.
a. lending

b. purchases

c. sales

d. taxes

6. At the end of a difficult year, the company are predicting pre-tax __________ of $5.7m
compared with $9.8m last year.
a. benefits

b. profits

c. gains

d. winnings

7. Goodfood Ltd. recorded sales last year of about $1.7b and shareholders are expecting to
receive a high ____________ on their shares.
a. dividend

b. payout

c. margin

d. interest

8. The shares that we bought in one of the new dotcom companies are expected to
__________ over the next two years.
a. increase in value

b. increase in number

c. decrease in value

d. decrease in number

9. The directors' key role is to reduce costs, increase sales and thereby ______ profits.
a. maximize

b. lead to

c. overcome

d. win

10. A good financial management system enables you to ________ important big picture and
daily financial objectives.
a. foresee
4

b. withdraw

c. accomplish

d. practise

Financial Results

Choose a suitable word or phrase in the list to fill in each blank below.
a profit and loss account
in the red

bottom line
accounting standard

gross profit
red ink

exceptional profit
pre-tax loss

annual report

loss

“A firm reports its performance in a particular
period in its results. Results for a particular year are
shown in the company’s (1)……........ . This contains,
among other things, (2)……………..
In theory, if a company makes more money than it
spends, it makes a profit. If not, it makes a
(3)……………. But it’s possible for a company to
show a profit for a particular period
because of the way it presents its activities under the
(4)……………or accounting rules of one country, and a loss under the rules of another. My
firm operates in many countries and we are very aware of this!
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Revision A

A pre-tax profit or a (5) …………… is one before tax is calculated. An (6) ………….or loss
is for something that is not normally repeated, for example the sale of a subsidiary company
or the costs of restructuring. A company’s (7) ……………is before charges like these are
taken away; it net profit is afterwards. The final figure for profit or loss is what people call
informally the (8)…………….. . This is what they really worry about!
If the company is making a loss, commentators may say that it is (9)………… They may also
use expressions with (10)…………. , saying, for example that a company is bleeding red ink
or hemorrhaging red ink”.

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