6 Questions
What is the primary purpose of analyzing financial statements?
To assess a company's financial health and performance
Which type of budgeting involves allocating resources based on the current budget and increasing it by a certain percentage?
Incremental budgeting
What is the term for costs that remain the same even if the level of activity changes?
Fixed costs
Which accounting standard is followed in the European Union?
IFRS
What is the term for a framework that measures performance from four perspectives: financial, customer, internal processes, and learning and growth?
Balanced Scorecard (BSC)
What is the ratio that measures a company's ability to pay its short-term debts?
Current Ratio
Study Notes
Financial Statement Analysis
- Analyzing financial statements (Balance Sheet, Income Statement, Cash Flow Statement) to assess a company's financial health and performance
- Ratio analysis: liquidity, profitability, efficiency, and solvency ratios to evaluate a company's financial position
- Vertical analysis: analyzing financial statements in terms of percentage of a base item
- Horizontal analysis: analyzing changes in financial statements over time
Budgeting and Forecasting
- Budgeting: preparing financial plans for future periods to achieve business objectives
- Forecasting: predicting future financial outcomes based on historical data and trends
- Types of budgets: operating, capital, cash, and project budgets
- Budgeting techniques: zero-based budgeting, incremental budgeting, and priority-based budgeting
Cost Accounting
- Cost classification: direct and indirect costs, fixed and variable costs, and sunk costs
- Cost behavior: understanding how costs change in response to changes in activity levels
- Cost accounting systems: job costing, process costing, and activity-based costing
- Cost management: cost reduction, cost control, and cost improvement strategies
Accounting Standards and Regulations
- Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)
- Financial Accounting Standards Board (FASB) and Securities and Exchange Commission (SEC) in the US
- International Accounting Standards Board (IASB) and European Securities and Markets Authority (ESMA) in the EU
- Compliance with accounting standards and regulations: financial reporting, auditing, and disclosure requirements
Performance Measurement
- Financial performance metrics: profitability ratios (e.g., ROI, ROE), efficiency ratios (e.g., asset turnover), and liquidity ratios (e.g., current ratio)
- Non-financial performance metrics: customer satisfaction, market share, and product quality metrics
- Balanced Scorecard (BSC): a framework for measuring performance from four perspectives: financial, customer, internal processes, and learning and growth
- Key Performance Indicators (KPIs): measurable targets for evaluating performance and achieving strategic objectives
Test your knowledge of financial management and accounting concepts, including financial statement analysis, budgeting, cost accounting, accounting standards, and performance measurement.
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