Inland Revenue and Customs and Excise

The accounts are used as the basis of task assessment. Profitability is looked at carefully - are the profits reasonable given the nature of the business? Are all sales transactions being recorded?

Registrar of Companies

Do the accounts comply with the Companies Acts? They are then filed and available for anyone to see them, e.g. journalists, credit agency, the police, an accountancy student etc.

Long-term lenders, e.g. banks, debenture holders

Accounts are often used to assess whether or not a loan should be given in the first place. They are then used to see if the loan should be continued. Areas looked at are: Profitability - does the profit performance mean that the company will continue trading? Liquidity -does it have the cash to pay interest and make loan repayments? Assets — what assets are available as security for loans, debentures, overdrafts?

Trade and expense

Liquidity - what current assets are available to meet current liabilities? creditors What do the current assets consist of? Will they realise their balance

sheet values?

Potential investors

As for shareholders (but with the question) - is this company worth and their advisers investing in?

Lots of people can benefit from the preparation of a company's accounts if they can understand them.

The accountant needs the ability to assess whether a given ratio is good or bad. An aid to this is the use of comparisons. These may be of two types:

(a) Internal - comparisons with previous results of the business, or with expected results.

(b) External - comparisons with other businesses, particularly those in similar types of business.

Vocabulary focus

TASK 1. Match the English phrases with the Russian ones. Make up questions with the English variants.

1) level of profits	a) высказывать свое мнение, комментировать коэффициенты
2) reflect efforts	b) для облегчения
3) meet debts, current liabilities	c) уровень прибыли
4) a sufficient return for the shareholders' investment	d) выделять, выдвигать на первый план слабые места
5) sufficient cash	e) налогообложение
6) highlight areas of weaknesses	f) отражать усилия
7) tax assessment	g) выполненный анализ
8) security for loans, debentures, overdrafts	h) гарантия долга, долговых обязательств, долговых расписок, превышения кредита
9) be worth investing in	i) достаточный возврат на инвестиции вкладчиков
10) analysis carried out	j) стоит вкладывать во что-то
11) for ease of smth.	к) достаточное количество наличных
12) comment on ratios, their purpose and assessment	1) покрывать/оплачивать долги, краткосрочные обязательства

TASK 2. Read the following terms concerning ratios and financial

organisations which use them? and their definitions. Give their Russian equivalents and try to remember them.

1) ratio	a) proportion or quantity of something compared to something else
2) ratio analysis	b) method of analysing the performance of a company by showing the figures in its accounts as ratios and comparing them with those of their companies
3) assessment	c) calculation of value
4) registrar	d) person who keeps official records
5) the Registrar of Companies	e) government official whose duty is to ensure that companies are properly registered, and that, when registered, they file accounts and other information correctly
6) return	f) profit or income from money invested: • return on assets (ROA) • return on capital employed (ROCE) • return on investment (ROI)
7) ROI	g) profit shown as percentage of the capital in a business
8) the Inland Revenue	h) British government department dealing with taxes (income tax, VA T corporation tax,
9) Customs and Excise	i) British government department which organizes the collection of taxes on imports, excise duty on alcohol, etc. and VAT
10) VAT	j) value added tax
11) Net profit margin	this measures the final profit made on sales after all of the running expenses have been deducted from the gross profit. If this percentage has fallen whist the gross profit margin has remained constant then increases in running costs should be investigated and efforts made to reduce them

TASK 3. Learn the main accounting ratios, say if it is easy to calculate them. Do they differ from the Russian ones?

We shall now see the way in which the main ratios are calculated what they are attempting to demonstrate and how they can be assessed. This should provide you With the basic tools to interpret a set of accounts.

For ease of reference the ratios are often split into categories covering the main features of interest. They are given together with the method of calculation.