9706 · 3.5.1
Analysis and Communication of Accounting Information flashcards
Revision flashcards for Cambridge 9706 Analysis and Communication of Accounting Information (syllabus 3.5.1). Flip, recall, then mark a real past-paper question.
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Gearing Ratio
Measures the proportion of a company's capital that comes from debt. A high ratio (e.g., >50%) indicates high financial risk.
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Interest Cover
Measures a company's ability to pay interest on its debt out of operating profits. A low number indicates a risk of defaulting on interest payments.
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Earnings Per Share (EPS)
The amount of profit earned for each ordinary share in issue. A key indicator of profitability for shareholders.
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Price/Earnings (P/E) Ratio
Compares the company's share price to its earnings per share. A high P/E ratio can indicate market optimism about future growth.
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Dividend Yield
The return a shareholder gets from dividends, expressed as a percentage of the share price. Useful for comparing income from shares with other investments.
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Dividend Cover
Shows how many times the dividend could be paid from the company's current profits. A low number (e.g., <1.5) suggests the dividend may be unsustainable.
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Working Capital Cycle
The time (in days) it takes to convert net working assets (inventory, receivables) into cash. A shorter cycle is more efficient.
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Current Ratio
Measures a company's ability to pay its short-term liabilities with its short-term assets. A commonly accepted benchmark is between 1.5 and 2, but this varies by industry. Formula: Current Assets / Current Liabilities.