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PROFIT AND LOSS STATEMENT (short)

+NET TURNOVER
+Other operating income
-Raw materials and services
-Staff expenses
-Depreciation and reduction in value
-Other operating charges
=OPERATING PROFIT (LOSS)
Financial income and expenses
PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES
Appropriations
Income taxes
PROFIT (LOSS) FOR THE FINANCIAL YEAR

BALANCE SHEET (short)

Assets
NON-CURRENT ASSETS
Intangible assets
Tangible assets
Investments

CURRENT ASSETS
Stocks
Debtors
-Long-term debtors
-Short-term debtors
Investments
Cash in hand and in banks
Total

Equity and liabilities

CAPITAL AND RESERVES

APPROPRIATIONS

PROVISIONS

CREDITORS
-Long-term creditors
-Short-term creditors
Total
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PROFIT AND LOSS ACCOUNT/INCOME STATEMENT

1. NET TURNOVER
2. Variation in stocks of finished goods and in work in progress
3. Work performed by the undertaking for its own purpose and capitalised
4. Other operating income
5. Raw materials and services
a) Raw materials and consumables
aa) Purchases during the financial year
ab) Variation in stocks
b) External services
6. Staff expenses
a) Wages and salaries
b) Social security costs
ba) Pension expenses
bb) Other social security expenses
7. Depreciation and reduction in value
a) Depreciation according to plan
b) Reduction in value of goods held as non-current assets
8. Other operating charges
9. OPERATING PROFIT (LOSS)
10. Financial income and expenses
a) Income from group undertakings
b) Income from participating interests
c) Income from other investments held as non-current assets
d) Other interest and financial income
e) Reduction in value of investments held as non-current assets
f) Reduction in value of investments held as current assets
g) Interest and other financial expenses
11. PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES
12. Appropriations
a) Change in depreciation reserve
b) Change in untaxed reserves
13. Income taxes
14. PROFIT (LOSS) FOR THE FINANCIAL YEAR
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BALANCE SHEET

Assets
A NON-CURRENT ASSETS
I Intangible assets
1. Research expenses
2. Development expenses
3. Intangible rights
4. Goodwill
5. Other capitalised long-term expenses
6. Advance payments
II Tangible assets
1. Land and waters
2. Buildings
3. Machinery and equipment
4. Other tangible assets
5. Advance payments and construction in progress
III Investments
1. Holdings in group undertakings
2. Receivables from group undertakings
3. Participating interests
4. Receivables from participating interest undertakings
5. Other shares and similar rights of ownership
6. Other receivables

B CURRENT ASSETS
I Stocks
1. Raw materials and consumables
2. Work in progress
3. Finished goods for sale
4. Other stocks
5. Advance payments
II Debtors (long-term, short-term)
1. Trade debtors
2. Amounts owed by group undertakings
3. Amounts owed by participating interest undertakings
4. Loan receivables
5. Other debtors
6. Prepayments and accrued income
III Investments
1. Holdings in group undertakings
2. Own shares or similar rights of ownership
3. Other shares and similar rights of ownership
4. Other investments
IV Cash in hand and in banks
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Equity and liabilities

A CAPITAL AND RESERVES

I Subscribed capital (share capital)
II Share premium account
III Revaluation reserve
IV Other reserves
1. Legal reserve
2. Reserves provided for by the articles of association or comparable rules
3. Other reserves
V Retained earnings (loss)
VI Profit (loss) for the financial year

B APPROPRIATIONS
1. Depreciation reserve
2. Untaxed reserve
C PROVISIONS
1. Provisions for pensions
2. Provisions for taxation
3. Other provisions
D CREDITORS (long-term, short-term)
1. Debenture loans
2. Convertible debentures
3. Amounts owed to credit institutions
4. Pension loans
5. Advances received
6. Trade creditors
7. Bills of exchange payable
8. Amounts owed to group undertakings
9. Amount owed to participating interest undertakings
10. Other credits
11. Accruals and deferred income
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FINANCIAL STATEMENT ANALYSIS (RATIO ANALYSIS)

The reasons for financial statement analysis are e.g.

- Past performance is used to predict future performance of a company

- Problems areas can be identified

Financial statement analysis involves the examination of both the relationships among the financial
statements amounts and the trends in those amounts over time.

Relationships between financial statement amounts are called financial ratios.

When you are analysing financial statements, it is best to reduce amount comparisons to percentages or
ratios so that you have an easy way to judge those comparisons. And if you compare those ratio results
with what you know to be good, satisfactory or poor, you have a way of determining the health of a
business.

Simply put, ratio analysis means changing amount comparisons to ratios and then comparing those ratios
with well-known standards.

Compare the results of the ratios also with

- other companies in the same sector

- the results of the same company in the last few years

When we are going to analyse the health of a business, we have to know about its

- profitability
- liquidity
- solidity

PROFITABILITY

Every company must be profitable. If the revenues exceed the costs, the company is profitable provided
that the owners are satisfied with the profit. If the costs are bigger than the revenues, the company is not
profitable in the short run.

Why is profit needed ?

- profit rewards the risk the owners have taken.

- profit is needed for growth
- profit is needed for investments
- profit is needed for the years the company will run at a loss
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PROFITABILITY
• OPERATING PROFIT %

100* Operating profit

Net turnover

The operating profit shows how much of the primary net sales is left before financial items and income taxes.

Operating profit: above 10 % good

5 – 10 % satisfactory
below 5 % poor

• NET PROFIT %

100* Net profit

Net turnover

Net profit = Profit /loss before appropriations and taxes - income taxes.

The net profit should be positive. Its sufficiency and required minimum level are determined according to, among
others, the attempts to strengthen the capital structure and dividend distribution targets.

• RETURN ON ASSETS %

100 * (Net profit + interest and other financial expenses + income taxes)

Balance sheet total (= Total assets)

above 10 % good
5 – 10 % satisfactory
below 5 % poor

LIQUIDITY

Liquidity means that the company has to have enough money to be able to pay the bills in time.

• QUICK RATIO

Quick ratio indicates the ability of a company to pay its short term creditors from its resources of
current financial assets.

Current financial assets (short-term debtors, investments and cash in hand and at bank)
Current liabilities (current/short-term creditors)

above 1 good
0,5 – 1 satisfactory
below 0,5 poor
• CURRENT RATIO

Current ratio indicates the ability of a company to pay its short term creditors from its resources of
current assets.
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Current assets (stocks + current financial assets)

Current liabilities

above 2 good
1–2 satisfactory
below 1 poor

• ACCOUNTS RECEIVABLES TURNOVER

Receivables turnover indicates the average number of days that elapse between sales and cash
collections.

365 * Sales receivables(= accounts receivables, trade debtors)

Net turnover

• ACCOUNTS PAYABLE TURNOVER

Accounts payable turnover indicates the average number of days it takes to pay back the accounts
payable.

365 * Accounts payable (= trade creditors)

Purchases during the financial year + External services

Receivables turnover should be shorter than accounts payable turnover.

SOLIDITY
Solidity means that the company has enough equity compared with the credits or compared with the balance sheet
total.

• EQUITY RATIO

Equity ratio indicates what is the percentage of the equity and appropriations from the total assets. It
measures the company’s ability to withstand losses and ability to meet its commitments over the long
time.

100 * (equity + appropriations)

Balance sheet total

above 40 % good
20 – 40 % satisfactory
below 20 % poor

• RELATIVE INDEBTEDNESS

Relative indebtedness indicates the percentage of the creditors from the net turnover.

100 * Creditors
Net turnover
below 40 % good
40 – 80 % satisfactory
above 80 % poor