Financial Analysis

pAper p8

Financial Analysis

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Tony Sweetman offers a model approach to answering a recent exam question that tested the candidates’ ability to dissect and decipher financial statements.

The analysis and interpretation of financial accounts represents 35 per cent of the syllabus content for paper P8. This means that it is highly examinable and should be addressed seriously by candidates preparing for this exam. In the May 2005 paper, question five in section C covered interpretation and analysis issues. The question was worded as follows.

1 DM’S BALAnCE ShEET AT DECEMBER 31, 2004

non-current assets Property, plant and equipment Goodwill Current assets Inventories Trade receivables Cash $m 580 100 47 12 46 2004 $m 680 105...