Introduction to Accounting and Finance - Interpretation of Relaxation's Financial Statements

Introduction to
Accounting and
Finance

Contents
Q1: Features of Relaxation’s financial statements..........................................................................3
a) Considering the two statements answer the following:...........................................................3
b) Explain the distinct goals of the THREE major financial statements in a few sentences.......3
Q2: Interpreting Relaxation’s Statement of Profit or Loss (SPL)...................................................4
a) Identify the shift between 2019 and 2020 by calculating the percentage change in total
income..........................................................................................................................................4
b) Calculate the contribution of each source of revenue to total revenue....................................4
c) The gross profit margin ratio is calculated for each segment..................................................5
d) In the Statement of Profit or Loss, explain the major difference between cost of sales and
operating expenditures.................................................................................................................5
e) The operational profit margin ratio is calculated for each segment........................................5
f) Give ONE reason why the online store's operational profit margin is larger than the other
sectors of the firm........................................................................................................................6
Q3: Interpreting Relaxation’s Statement of Financial Position (SOFP)..........................................6
a) Explain why depreciation is paid and how it affects the property, plant, and equipment's
worth............................................................................................................................................6
b) Calculation of different ratios..................................................................................................6
c) Explain how interest cover ratios and gearing assist us evaluate a company's financial
stability........................................................................................................................................6
Q4: Interpreting Relaxation’s Statement of Cash Flows.................................................................7
Identify THREE transactions that resulted in this monetary outflow. You must explain why
each financial outflow occurred...................................................................................................7
Q5: Recommendation......................................................................................................................7
REFERENCES................................................................................................................................9