1. Finance and Accounts 1

2. Finance and Accounts

3. Key Terms

8. Break Even

10. Purpose of Accounts

12. Profit and Loss Account - Flow

14. Profit and Loss Account Profit and Loss Account for British Airways plc Source: http://www.bized.ac.uk/cgi-bin/ratios/ratiodata.pl Turnover – the revenue earned over the year Gross Profit = turnover – cost of sales Operating Expenses – the fixed costs Operating or Net Profit = Gross profit – operating costs Cost of Sales – the variable costs, how much it cost the firm to produce what it has sold – not to be confused with sales revenue! Subtract other costs and expenses incurred to get profit before tax Subtract interest payments/receipts to get profit on ordinary activities before tax Subtract tax due to get profit on ordinary activities after tax Final section called ‘appropriation account’ – shows where the profit/loss is going Dividend – the share of the profit returned to shareholders Retained Profit – the amount kept back for future investment, etc. Consolidated Profit & Loss Account for the year ended 2003 2002 2001 Weeks 52 52 52 Currency £ million £ million £ million Turnover 7688.0 8340.0 9278.0 Cost of sales -7263.0 -8291.0 -8757.0 Gross Profit 425.0 49.0 521.0 Operating Expenses -130.0 -137.0 -77.0 Operating Profit 295.0 -88.0 444.0 Other costs/income 95.0 166.0 -68.0 Profit before interest and taxation 390.0 78.0 376.0 Net interest receivable (payable) -255.0 -278.0 -226.0 Profit on ordinary activities before taxation 135.0 -200.0 150.0 Tax on profit on ordinary activities -50.0 -71.0 -69.0 Profit on ordinary activities after taxation 85.0 -129.0 81.0 Equity minority interests -13.0 -13.0 -14.0 Profit for the financial period 72.0 -142.0 67.0 Dividends 0.0 -193.0 Retained profit 72.0 -142.0 -126.0

15. Balance Sheet - Snapshot

17. Balance Sheet – Part 1 Fixed Assets – assets not used up in production or lasting longer than one year – equipment, buildings, machinery, etc. Fixed assets can be tangible – i.e. physical items or intangible – i.e. brand name, goodwill. Current Assets: assets that are used up during production and which are likely to yield cash in the coming year – for example, stock will be sold and debtors owing the business money will pay up! Consolidated Balance Sheet for the year ended 2003 2002 2001 Weeks 52 52 52 Currency £ million £ million £ million Fixed assets Intangible Assets 164.0 105.0 60.0 Tangible Assets 9487.0 10509.0 10662.0 Investments 524.0 489.0 426.0 Total Fixed Assets 10175.0 11103.0 11148.0 Current assets Stock 87.0 109.0 170.0 Debtors due within one year 986.0 1231.0 1444.0 Short-term investments 1430.0 1155.0 865.0 Cash at bank and in hand 222.0 64.0 71.0 Total Current Assets 2725.0 2559.0 2550.0

18. Balance Sheet – Part 2 Subtracted from the assets are the money the company owes to creditors – suppliers for example And to those who are longer term creditors – loans, mortgage on property etc This leaves us with ‘Net Assets’ The funds to acquire these assets must have come from somewhere – the next section tells us where it came from. It can come from share capital and from retained profit (profit and loss account) The total capital employed must be the same as the sum of the net assets – hence the term ‘balance’ sheet! Creditors: Amounts falling due within one year -2904.0 -3201.0 -3308.0 Net Current Assets (liabilities) -179.0 -642.0 -758.0 Total assets less current liabilities 9996.0 10461.0 10390.0 Creditors: Amounts falling due after more than one year -6553.0 -7097.0 -6901.0 Provisions for liabilities and charges -1169.0 -1157.0 -1164.0 Net assets 2274.0 2207.0 2325.0 Capital and reserves Called-up share capital 271.0 271.0 271.0 Share premium 788.0 788.0 788.0 Other reserves 270.0 270.0 290.0 Profit and loss account 729.0 687.0 772.0 Equit shareholders' funds 2058.0 2016.0 2121.0 Minority interests 216.0 191.0 204.0 Total capital employed 2274.0 2207.0 2325.0