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Financial risks-Chapter 3

Elsevier Ltd
DOI: 10.1016/b978-075065903-1.50003-2


Publisher Summary This chapter explores the various financial risks that a business can encounter. It provides an overview of the financial statements that companies produce, why they produce them and what their constituent parts are, by using concrete examples and illustrations. The chapter begins with an introduction to financial statement analysis and a discussion on the purpose and use of company annual accounts. It then takes a detailed look at the background to the annual report and accounts including the background to the Companies Acts and Statement of Accounting Policies. It also examines the content and relevance of auditors' report and directors' report. The balance sheet is then treated thematically, covering the principal accounts—debtors, creditors, stock and work in progress, borrowings, fixed assets, share capital, and reserves. Finally, the chapter examines the workings of the profit and loss (P/L) account and cash flow statements, and ends with a simple ratio analysis and discussion of the limitations of published accounts.

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