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Seminars

NBS8135 Introduction to Financial Reporting

Seminar Programme 2024/2025

Table of Contents

Seminar 1 [Wed 16 October 2024] – Grekz

The objective of this seminar is to get you familiar with the effects of typical business transactions on the financial position and performance of a business as shown by its three primary financial statements.

The work will focus on a case study, Grekz, which summarises the financial transactions of the business for its first year. Pro formas are supplied for you to complete. Interpretation is important and you will be asked to discuss the results of the business for the year and its financial position as at the end of the year.

The case study material [Grekz] can be downloaded from here.

STUDY HINTS FOR GREKZ

This case study tests your understanding of two things:

Firstly

The form and content of a set of sole trader’s financial statements

You need to be familiar with the layout of the following financial statements

The Statement of Cash Flows

Step 1: Go through the case study and list all the transactions which involve an immediate cash inflow or outflow. While you are doing this create two lists i) cash inflows to the business and ii) cash outflows from the business.
Step 2: Rearrange the cash flows in the form of a simple cash flow statement showing the cash in the business as at the end of the first year’s operations.

The Statement of Financial Position

The Morag Shalini case study will be useful here.

Step 1: go through the case study and list all the assets and liabilities of the business as at the end of the year. Separate the assets into non-current (or fixed assets) and current assets.
Step 2: go through the case study and list all the liabilities of the business. Seperate these into current liabilities and non-current liabilities.
Step 3: the difference between the total assets and the total liabilities will the Capital as at the end of the year.

The Income Statement

This is the hardest of the three statements to prepare. The Income Statement is prepared on an accruals basis. This means that you are tracing/calculating items of expense and income relating the reporting period not the actual amount paid or received. There is a elearning presentation which introduces the fundamentals of accrual accounting (click the link to access this material). You must go through this. It will help you with your preparation for the seminar. Make sure you can answer all the quiz questions!

The hardest part of the Income Statement is at the top i.e. calculating

Revenue, and
Cost of sales

Gross profit will be the difference between these two figures.

Don’t put the owner’s drawings in the Income Statement – it’s not a business expense. Drawings should be deducted from Capital.

Be prepared to spend quite a lot of time on this exercise – it’s not easy if you are a beginner.

It is best to attempt this before your seminar so that you have questions to ask the tutor.

Suggested solutions will be published after the last seminar.

Seminar 2 [Wed 13 November]

For the second seminar I would like you to focus on liquidity. ‘Cash is king!’ they say, especially in a recession. The origin of this phrase is unclear, but it has been attributed to Per G Gyllenhammar who used it in 1988, after the global stock market crash in 1987. Gyllenhammar was Chief Executive Officer of Swedish car group Volvo at the time.

You should look at the following companies:

Tesco PLC – 2024 financial statements from here
Kier Group PLC – 2023 financial statements from here

Use the links above to go to each company’s website and download the latest financial report/statements. Use the material covered in the lecture sessions to investigate the liquidity of each company. Just concentrate on liquidity – nothing else just yet.

Tesco is one of the biggest UK retail companies. So its liquidity should be excellent. Do the liquidity ratios confirm this?

Kier Group is a major engineering company. Engineering companies have a very different asset structure to supermarkets and football clubs. Some small engineering companies can be prone to liquidity difficulties in a recession. What about big ones? What do you make of this company’s liquidity ratios?

Are the traditional liquidity ratios of any use at all? Are there simpler or better ways to assess liquidity? Why do you want to assess liquidity anyway?

Remember:

Use the Statement of Cash Flows as well as your liquidity ratios
Remember liquidity can be too high as well as too low
Check how liquidity has changed over time
Look at the composition of current assets and current liabilities

Blank form

You may find that filling in this blank form will help you analyse the Statements of Cash Flows.

Completed form will be available after the last seminar.

Seminar 3 [Wed 27 November]

Cross sectional analysis using financial ratios. Case study Boxton.