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Chapter 21

Interpretation of financial statements

Outcome

By the end of this session you should be able to:

 define and compute relevant financial ratios, explaining what aspects of
performance they are intended to assess

 analyse and interpret ratios to give an assessment of an entity/group’s
performance and position compared to

– the previous period

– a similar entity/group

– industry average

 interpret financial statements from the perspective of different stakeholders

 discuss the limitations of ratio analysis, including:
– the impact of different accounting policies

– the use of historic information

– the manipulation of financial statements

– the use of year-end figures

– the interpretation of consolidated financial statements

 indicate other information relevant to assessing performance.

and answer questions relating to these areas.

The underpinning detail for this Chapter in your Integrated Workbook can
be found in Chapter 21 of your Study Text

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