Total Long Term Loans Total of loans from group companies, directors or hire purchase
comitments to the company of a long term nature (ie falling due in
excess of one year).
Other Long Term Liabilities Any other long term liabilities such as provisions for tax or pensions or
balance sheet minorities.
Issued Capital Paid up share capital such as preferred and ordinary stock in
circulation.
Retained Earnings Total of earnings from previous years which have been retained by the
firm.
Revaluation Reserve Revaluation of assets such as land & buildings may occur. This is the
amount of revaluation is recorded.
Shareholder Funds Paid up share capital, such as preferred and ordinary stock in
circulation, total of earnings from previous years which have been
retained by the company, plus any revaluation or other reserves.
Profit & Loss Items
Turnover (Sales) Turnover equals the total revenue earned during the year which has
been generated by normal trading operations, excluding VAT.
Cost Of Goods Sold Cost of goods sold include the total marginal costs of production such
as raw material costs.
Gross Profit Gross profit = turnover - cost of goods sold.
Administrative Expenses Administrative expenses include advertising, distribution and service
costs, sales expenses and other overheads.
Operating Profit Operating profit = gross profit + other operating income - administrative
expenses - other operating charges.
Exceptional Items Exceptional items are items of a non-recurring nature. These items are
added or deducted before pre-tax profit has been declared.
Non-trading Income Non-trading income is financial income such as dividends and interest.
Profit Before Interest & Tax This is the profit generated using all the assets in the business which is
distributed amongst those who have provided the assets.
Net Interest Interest is paid to lenders for money borrowed and is received on
balances held in interest bearing accounts. This is the net figure positive
means interest paid out negative means interest received by the firm.
Pre-tax Profit Pre-tax profit is the income generated prior to taxation.
Tax Paid Tax is money payable to the government in the financial year based
upon earnings in the previous year.
Extraordinary Items Extraordinary items are items of a non-recurring nature. Extraordinary
items are generally larger and less usual than exceptional items. They
are added or deducted after pre-tax profit has been declared.
Minority Interests This occurs when consolidated group accounts include subsidiaries
which are not wholly owned. This is a payment to equity shareholders
of these other companies.
Chapter Five Terms & Ratios | 49
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