Financial Statements

A company and its shareholders need to know information about the company’s financial performance. Companies give information about their financial situation in financial statements. This information is compiled by the company accountants and checked by independent auditors. The company’s annual report consists of three financial statements:

s profit and loss account/P& L (BrE) or income statement (AmE) This account shows the revenue (money coming into the business) and expenditure (money going out). It also shows the company’s turnover (total sales), costs and overheads.

s balance sheet This account shows the financial situation of the company on a particular date, usually the end of the financial year. It consists of a list of assets (cash investments, property and debtors – money owed by customers) and liabilities (all the money that the company will have to pay out, such as taxes, mortgage and money owed to suppliers). Firms in a good situation are said to have a strong balance sheet and those that are not, a weak one.

s cash flow statement This document shows the flow of cash in and out of the business. It includes sale of assets, issuing of shares, payment of dividends, trading profits and many other activities.

When company’s accounts are presented in a way that makes performance look better than it really is, the company may be accused of window dressing or creative accounting.

Exercises in Word Study

Ex.1. Form nouns from the following verbs:

perform, inform, supply, pay, act, present, accuse, audit, account (for).

Ex.2. Give the English for:

фінансовий звіт компанії, акціонери, фінансова діяльність компанії, бухгалтер, незалежний аудитор, річний звіт, звіт про прибутки та збитки, доходи та витрати, накладні витрати, балансовий звіт, активи та пасиви, майно, податки, застава, постачальники, баланс оборотних коштів, продаж активів, виплата дивідендів.

Ex.3. Match words from list A with words from list B that have a similar meaning:

Ex.4. Find suitable opposites to the following words and phrases:

profit; assets; a strong balance sheet; to look better; to absolve.

Ex.5. Match the nouns in left-hand column with the verbs in the right-hand column.