UNIT 2:

FINANCIAL
STATEMENTS AND
RATIOS

SAMPLE OF BALANCE SHEET

Balance Sheet
Account Description Debit Credit
------- ------------------------------ ---------- ---------1400 1500.00
1000 899.01
1100 1000.00
1300 2100.99
---------- ---------Total Assets 5500.00
2100 3500.00
---------- ---------Total Liabilities 3500.00
3100 4000.00
3200 2000.00
---------- ---------Total Equity 2000.00
---------- ---------Total Liabilities and Equity 5500.00

SAMPLE OF PROFIT AND LOSS STATEMENT

MATCH

1. Consolidated g.

a. Assets

2. Retained

b. Receivables

3. Current

c. Earnings

4. Total

d. Stock

5. Accumulated e

e. Gains

6. Intangible

f. Liabilities

7. Common

g. Affiliates

_______________ a. An asset which does not have a physical nature

(such as a trademark or a patent).
_______________ b. The holding company owns a minority interest
(less than 50%), but the accounts are nevertheless consolidated.
_______________ c. The total legal obligations of a company to pay
other parties
_______________ d. The ordinary shares by the owners, who
therefore the last to receive their money back in the event of
liquidation
_______________ e. Amounts that will be collected in the normal
course of business within one year.
_______________ f. Profit which is not paid out to shareholders in
the form of dividends, but instead is kept by the company to
reinvest or pay off debts.
_______________ g. The amounts affecting common stockholders,
but not from movements in the stock of the company (e.g.
currency translation adjustments)

a. Intangible assets

e. Current receivables

b. Consolidated affiliates

f. Retained earnings

c. Total liabilites

g. Accumulated gains

d. Common stock

FILL IN THE TABLE

U.K

U.S.A

Vietnam

Balance sheet

Statement of

Bo co ti

Financial Position

chnh

Profit and Loss

Statement of

Bn bo co

Statement

Earnings

li l

Shareholder

Stockholder

C ng

Stock

Inventory

Bn k ti

Leverage

sn
T s vn vay

Gearing

Balance sheet:

- A written statement showing the amount of money

and property a company has
- The money received from shareholders and creditors
(bng quyt ton, bng cn i k ton, bng i chiu
ti sn v n, bng tng kt ti sn)

 Net

earnings

a It's better than last year.

e A lot more this year.
f It's not as low as two years ago

 Interest

and financial charges

b It's gone down since last year.

Basic

earnings per share

h It's exactly the same.

 Earnings

before income taxes and

accounting changes

f It's not as low as two years ago

e A lot more this year

 Total

revenues

a It's better than last year.

e A lot more this year
f It's not as low as two years ago

 Dividends

declared per share

C Slightly more this year

Other costs and expenses

g It's virtually the same.

Sales of services

g It's virtually the same.

C Slightly more this year

OK. Norma has asked me to go over some

of the ratios I used in the report which I sent you last
week. The first of these is on page 3 - working capital.
Everyone got it? OK. Working capital is quite simple it's the current assets divided by the current
liabilities. Any questions? Yes. What's it for?
Accountant Well, it basically tells us whether we have
enough short-term assets to cover our short term
debt. If we don't, we could be in trouble. OK? Good.
Next is return on assets. This is net income plus
interest expense divided by total assets. Before you
ask, it allows us to evaluate the way we use our
assets. It can help us decide whether or not we
should start a new project, for example, by
comparing the return expected against the normal
borrowing costs. Is that clear?
Accountant

I have a question. What's

debt/asset ratio?
Accountant I was just coming to that. It's
the total assets divided by total liabilities.
It tells us what proportion of the
enterprise's assets are being financed
through the use of debt. If this ratio is high
in a market with increasing interest rates,
creditors are going to get worried. The
debt/asset ratio determines the funding
leverage of the enterprise. OK, if there are
no questions, I'd like to ...
Accountant

the
GIVE
current
DEFINITIONS
assets assets
net
plus
totalincome
divided

(1) Working capital interest

divided expense
by total
by
the
divided
by total

liabilities
(2) Return on Assets
current
assets

(3) Debt/ Asset Ratio

liabilities

Not
e

SAYING EQUATIONS/
FORMULAS

x
=

Plus, add, and

Minus, less, subtract
Divided by,
times, multiplied by
Equals, is
a x b = c a times (multiplied by) b equals
c
a-b/ c

a minus b divided by (or over) c

PRACTICE SAYING ..

7 + 8 = 15
20- 12= 8
2 x 6 = 12
50: 5 = 10

COMMON RATIOS
average
interest
rate
earnings
per
share
return on equity
debt/equity ratio

COMMON RATIOS
gross profit margin

inventory
turnover
price/earnings
ratio

a. Gross profit margin: t s

gi c
b. Earnings per share: li tc
trn mi c phiu
c. Return on equity: li tc
u t, thu nhp v vn c
phn
d. Average interest rate: t
sut li trung bnh

e. debt/equity ratio: t s
n
f. inventory turnover: t
l lun chuyn kho hng
g. price/earnings ratio: t
s gi c, t s li tc

a Gives 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
margin

b Determines the average interest rate at which a

company borrows funds.

Average interest
rate

c Compares the current market price with earnings

to calculate if a stock is over or under valued. Used
as a prediction or expectation of future
performance.

Price/earnings
ratios

Indicates the return a company gets on

the owners' investment. Companies that
make high returns 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 companys products.
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
tem debts
Debt/equity ratio

g.

Calculates the profit made on a per-share

basic. This is quoted by U.S. publicly held
companies in their financial statements
Earnings per
share

Complete the sentences

a)Expecting
b)Predict
c)Calculations
d)Performed
e)Expansion
f) Pay

Complete the table

VERBS

NOUNS

1. To predict

Prediction

2. To

pay
3. To compare
4. To calculat
5. To expect
e
6. To expand

Payment

7. To perform

Performan
ce

Comparison
Calculation
Expectation
Expansion

Fill in the gaps with suitable words,

then listen & check.
1. Norma has asked me to go .. some of
the ratios. I used in the report.
2. Everyone. It?
3. Before you .
4. Is .. clear?
5. I was .. coming to that.
6. OK, if there are no Id like to ..
ASK

GOT
JUST

OVER

QUESTIONS
THAT

2.8. Word building

Verbs
1.
2.
3.
4.
5.
6.
7.

To predict
To
pay
To compare
To calculate
To expect
To expand
To perform

Nouns
Prediction
2. Payment
3. Comparison
4. Calculation
5. Expectation
6. Expansion
performance
7.
1.

8.b
Use the verbs and nouns above to complete
the sentences
a.

Expecting

b.

Predict

c.

Calculation(s)

d.

Performed

e.

Expansion

f.

Pay

Fill in the gaps with suitable

words
1.

2.
3.
4.
5.
6.

over
Norma has asked me to go
..some of
the ratios I used in the report.
got
Everyone .
it?
Before you .
ask
Is .
that Clear?
I was.coming
to that.
just
question
Ok, if there are noId
like
s
to

2.10

Listen and fill in the gaps

Earnings before income taxes and accounting

changes
Provision for income taxes
Earnings before accounting changes
Cumulative effect of accounting changes
Net earnings
Per-share amounts
Per-share amounts before accounting changes
Diluted earnings per share
Basic earnings per share
Per-share amounts after accounting changes
Diluted earnings per share
Basic earnings per share
Dividends declared per share

 Li

nhun trc thu thu nhp v k ton thay

i
D phng thu thu nhp
Li nhun trc nhng thay i k ton
Hiu ng tch ly nhng thay i k ton net thu
nhp
Per-s lng c phiu
Per-s lng c phiu trc khi thay i k ton
Pha long thu nhp trn mi c phiu
Li c bn trn mi c phiu
Per-s lng c phiu sau khi thay i k ton
Pha long thu nhp trn mi c phiu
Li c bn trn mi c phiu
C tc trn mi c phiu

 Net

earnings: li rng
Interest and financial charges: li v ph tn ti
chnh
Basic earnings per share: li c bn trn mi c
phiu
Earnings before income taxes and accounting
changes: Li nhun trc thu thu nhp v thay
i k ton
Total revenues: tng thu ngn sch
Dividends declared per share: c tc trn mi c
phiu
Other costs and expenses: cc chi ph v ph khc
Sales of services: Doanh thu cc dch v