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We oftenmake comparisons whwn talking about financial statement,look again at the statement of

earnings on page 15 and find the figures for the items below,which sentence (a-h) can be used to describe and

compare the figure

1.Net earning (F) a. it’s better than last year

2.Interest and financial charges (B) b. Its gone down since last year

3.Basic earnings per share (2005-2006) (H) c. There’s quite a drop from (2005 to 2006)

4.Earnings before income taxes and accounting changes (E) d. It’s not as a low as two years ago

5.Total Revenue (D) e. Slightly more this year

6.dividends declared per share (A) f. A lot more this year

7.Other cost and expense (G) g. It’s virtually the same

8.Sales of services (C) h. It’s excatly the same

8. Some other common rations are given below.Match ratios with the formulas (1-7) and the descriptions


 Gross profit margin

 Earnings per share

 Return on equity

 Average

 Interest rate

 Debt/equity ratio

 Inventory turnover

 Price/earnings ratio
1 interest expenses (ans : Average interest rate)

Liabilities – account payable

2. net income – devidens on preferred stock (ans :Earnings per share)

Avarage share

3 net income (ans :Return on equity)

Shareholders equity

4 total liabilities (ans : debt/equity ratio)

Shareholders equity

5. revenue - cost of goods sold (ans :Gross profit margins)


6 cost of goods sold (ans :inventory turnover)

Average inventory

7 cost of goods sold (ans Price/arnings per share)

Earnings per share

a) Give’s the company’s pricing policy and mark up margins.An adequate gross margin allows a company to

pay its expenses,and then expand => Gross profit margins

b) Determines the avarege interest rate at which a company borrows funds. => Average interest rate

c) Compares the curent market price with earnings to calculate if a stock is over or under valued.used as a

prediction or expetation of future performance. => Pice/arnings per share

d) Indicates the return a company gets on yhe owners inverstment.Companies that make high return often do

not require more debt investments => Return on equity

e) Shows the turnover of inventory and can be compared against sales figures,to show the demand for the

company’s product. => inventory turnover

f) Indicates what proportion of equity and debt an enterprise uses to finance its assets.A more stringent test is

to use just the long term debt. => debt/equity ratio

g) Calculate the profitmade on a per share basis.This quoted by U.S publicly held companies in their financial

statements => Earnings per share

9. Use Words from the description above to complete the table.The first one is done for you.


To predict Prediction

To pay Payment

To compare Comparison

To calculate Calculation

To indicate Indication

To expand Expansion

To perform Performance

Now use verb or nouns from above to complete the sentence .You may need to change the form.

a. The figures are a little different to what we were EXPECTING

b. The problems in the middle east have made it really difficult to PREDICT next year turmover

c. I think there are some mistakes in the the CALCULATION(S)

d. The fund PERFORMED much better las year.This year has been very dissapointing

e. The EXPANSION into Eastem Eeurope looks good

f. We need to make sure that our customers PAY us on time.

10,Here are some phares the accountant use during the meeting in excersice 7,can ypu fill in the missing

words ?

1. Norma has asked me to go over some of the ratio i used in the report

2. Everyone got it ?

3. Before you ask

4. Is that clear ?

5. I was just coming to that

6. Ok,if there are no quetions i’d like to