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5 th Accounting

Understand debentures, intangible assets, dividends, and capital employed for effective financial interpretation. Discover the significance of gearing, shareholders' funds, and company regulations.

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5 th Accounting

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  1. 5th Accounting Analysis and Interpretation of Financial Statements

  2. Debentures • 6% Debentures (2017/2018) - Debentures are long term loans. They will be repaid in full during the years 2017/2018. They carry a fixed annual rate of interest of 6%. • 7% Debentures (2016/2017): • Debentures are Long-term Loans. The fixed annual rate of interest is 7%.Loan must be paid back in one lump sum during the year 2016/2017.

  3. Intangible Assets • Intangible Assets - These are assets that have real value but we cannot see. • Examples are patents and goodwill.

  4. Ordinary Dividend • Ordinary Dividend - The part of the net profit paid out to the Ordinary Shareholders. • They are paid after the preference shareholders. The rate is decided by the Directors

  5. Capital Employed • Capital Employed This is the total amount invested in the business. It is made up of • Issued Share Capital plus reserves plus long-term liabilities.

  6. Shareholders Funds: • The amount owed to the shareholders by the Company. It consists of the Issued Capital and • Reserves.

  7. Depreciation: • This is the loss in value of a Fixed Asset during the year because of usage or the passage oftime. A business will decide on a suitable %.

  8. Interest Paid: • This is the extra money paid back to the lender for the use of money borrowed from a Bank

  9. Gearing • Also called Leverage refers to the capital structure of a firm. There are two ways to finance business – Debt Capital and Equity Capital. Debt captial is borrowing and preference shares • Equity capital is ordinary shareholders funds which only receive a dividend if the firm can afford it.

  10. Liquid Assets • Current Assets which are readily convertible into cash. They comprise of bank, cash , debtors, short term investments.

  11. Dividends • Dividends is the portion of company profit given to shareholders. It is the return on their investment in the company. Preference shareholders get a fixed return and ordinary sharholders dividend depends on the level of profits available in any year.

  12. Shareholders funds • Shareholders funds is the total investment by shareholders in a company. It is made up of issued share capital plus reserves.

  13. Memorandum of Association • A Memorandum of Association is a document which governs a company’s dealings with the outside world. It states the company name, its objects, its limited liability and its authorised share capital

  14. Articles of Association • The Articles of Association is a document which governs the internal conditions of a company. It states the rights of shareholders, the procedures for meetings and any other internal regulations.

  15. 8% Cumulative Preference Shares • This is a share entitled to a fixed return of 8% per anum. The return is payable before any payment to ordinary shareholders. If dividends are unpaid, due to insufficient profits, the dividend is carried forward or accumulated to a future date.

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