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ACCT11059 USING ACCOUNTING FOR DECISION MAKING

TUTORIAL: WEEK 5

ANALYSING FINANCIAL STATEMENTS

In this week’s tutorial you will have the opportunity to review Week 5 of our course Analysing Financial
Statements, to work on your Assignment (ASS#2) and to also write one multiple choice question for
PeerWise along with a solution. After the tutorial, you can enter your question onto PeerWise. Please only
enter questions you have written. Do not try to enter questions other people have written.
Please bring to your tutorial a hard copy of your firm’s balance sheet and income statement. Bringing just
a hard copy of your firm’s balance sheet and income statement without the footnotes would be sufficient
(although, if you do this, it would be best if you can to bring a soft copy on your laptop with your firm’s full
financial statements including footnotes, so you could refer to these during the tutorial if needed).
Please come to your tutorial prepared to discuss the following questions:
Q1: What questions do you have about your ASS#2?

Q2: Restating your firm’s balance sheet:
(a) Put an ‘O’ (for operating) or an ‘F’ (for financial) next to each item in your firm’s balance sheet.
Come to your tutorial with any questions you have about doing this for different items in your
firm’s balance sheet.
(b) How do you think you should treat ‘cash’ (and/or ’bank overdraft’) in your firm’s balance sheet?
(c) What questions do you have about restating your firm’s balance sheet?

Q3: Restating your firm’s income statement:
(a) Put an ‘O’ (for operating) or an ‘F’ (for financial) next to each item of revenue and expenses in
your firm’s income statement. Come to your tutorial with any questions you have about
different items in your firm’s income statement.
(b) What questions do you have about including any ‘other comprehensive income’ or ‘dirty surplus’
identified in your restated statement of changes in equity into your restated income statement?
(c) Calculate the tax benefit for your firm of its financial activities (Tax benefit = Net interest expense
x tax rate of the firm):
a. What is the net interest expense of your firm?
b. What is your firm’s tax rate?
(d) What questions do you have about allocating tax to the operating and financial components of
your firm’s income statement? This is usually the most difficult step in restating a firm’s income
statement. It involves increasing the tax expense you deduct from your operating income by
the amount of the tax benefit, and correspondingly reducing your net financial expenses (NFE) by
the tax benefit to get net financial expense (NFE) after tax.
(e) What is your firm’s comprehensive operating income after tax (OI)?
(f) What questions do you have about restating your firm’s income statement?

Q3: Write one multiple choice question for PeerWise on a sheet of paper, along with its solution.




Martin Turner – Course Co-ordinator