Accounting Terms


Profit and Loss


The currency referred to in the figures - GBP = Great British Pound, EUR = Euro.

Consolidated A/cs

Are the accounts consolidated - Y = Yes, N = No.


Income earned from normal business activities, including the sale of goods and services net of VAT.


Direct exports from the country of incorporation.

Cost of Sales

The direct cost of goods and services supplied.

Gross Profit

The difference between Turnover and Cost of Sales.

Wages & Salaries

Total employee costs including pensions and social security.

Directors Emoluments

Total payment made to directors for services as directors.

Operating Profit

The results of the company after deducting its Operating Costs from Gross Profit.


The amount written off Tangible Fixed Assets during the year, including impairment charges.

Audit Fees

The amount paid to the auditors for the statutory audit.

Interest Payments

Interest paid by the business after any capitalised element, excluding exchange gains or losses.

Pre Tax Profit

This equates to Operating Profit less Non-operating Items.


Tax charges paid against profits. This can be positive representing a Tax credit.

Profit After Tax

The profit or loss of the company after the deduction of corporation tax.

Dividends Payable

The total amount of profits distributed to shareholders.

Balance Sheet

Tangible Assets

Physical assets owned by the company which can be seen or touched such as land, machinery etc. plus Investments and debtors due after 1 year.

Intangible Assets

This relates to 'assets' that have a value but have no physical existence such as Trade Marks, Patents, Goodwill, Research & Development etc.

Total Fixed Assets

The total of Tangible and Intangible Assets.


Goods on hand as yet to be sold and work in progress (goods not considered to be a final product).

Trade Debtors

Amounts owing from customers to the company for goods and services supplied on credit.


Cash includes cash in hand and cash at bank.

Other Debtors

Amounts owing from group companies or any other debtors not included in trade debtors.

Miscellaneous Current Assets

Any asset due within one year that isn't included in Debtors, Stocks and Cash such as short term investments.

Total Current Assets

The total of Stocks, Debtors, Cash and other assets due within one year.

Trade Creditors

The amount owing to suppliers for goods and services provided on credit.

Bank Loans & Overdrafts

Total amount of Bank loans and overdrafts.

Other Short Term Finance

Any finance to the company due within one year from any organisation other than banks.

Miscellaneous Current Liabilities

Any liability due within one year that isn't included in Trade Creditors, Bank Loans and Overdrafts and Other Short Term Finance e.g. Accruals and deferred income

Total Current Liabilities

The total of Trade Creditors, Bank Loans & Overdrafts, Other Short Term Finance and Miscellaneous Current Liabilities.

Bank Loans & Overdrafts and LTL

The total of Total Long Term Liabilities and Bank Loans and Overdrafts.

Other Long Term Finance

Any finance to the company due after one year from any organisation other than banks.

Total Long Term Liabilities

The total of Other Long Term Finance, long term bank loans, Pension Liability, Provisions and any other non-current liabilities.

Capital & Reserves

Called Up Share Capital

This is the issued and paid share capital from shareholders.

P & L Account Reserve

The accumulation of profits/losses from previous trading periods.

Revaluation Reserve

Any unrealised gains on revaluations of Fixed assets.

Sundry Reserves

The total of Capital reserves, Share premium account, any other related company reserves and capital grants.

Shareholder Funds

The total of Called up Share Capital, P&L Account Reserve, Sundry Reserves and Revaluation Reserve.

Other Financial Items

Net Worth

Often referred to as the 'book value' of the business this equals Shareholders Funds less Intangible Assets.

Working Capital

Total Current Assets less Total Current Liabilities. This represents the surplus/deficit of funds from normal trading activities.

Total Assets

The total of Total Fixed Assets and Total Current Assets.

Total Liabilities

The total of Total Long Term Liabilities and Total Current Liabilities

Net Assets

Total Assets less Total Liabilities

Cash Flow

Net Cashflow from Operations

Net cash from buying/selling goods and services from commercial transactions.

Net Cashflow before Financing

This is the total cash generated or used by the business before any funding activity and movements in the cash balances. If positive, the business has generated a cash surplus, which can be used as liquid funds or to repay debt.

Net Cashflow from Financing

Cash derived from the issue of equity capital or the use of loan facilities matched against the cash utilised in repaying borrowings.

Increase in Cash

The difference between the current and previous year's cash totals.


Contingent Liability

Whether or not the company has any potential liabilities. These include guarantees, indemnities and letters of credit.

Capital Employed

The total of Shareholders Funds and Total Long Term Liabilities.

Number of Employees

Total number of personnel employed by the company.



Pre-tax profit margin %

Pre-tax profits / Turnover x 100. This shows the percentage of Profit in each pound of sales or the equivalent of retailers 'mark-up'.

Current ratio

Total Current Assets / Total Current Liabilities. This is an indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is.

Sales/Net Working Capital

Turnover / (Total Current Assets - Total Current Liabilities). The higher the ratio the higher the volume of Sales made per the companies working capital.

Gearing %

Bank Overdraft and Loans plus Total Long Term Liabilities/Shareholders funds x 100. This is the relationship between the size of the companies debt in proportion to Equity (Shareholders Funds).

Equity in %

Shareholder Funds / (Total Current Assets + Tangible Fixed Assets) x 100. This ratio shows the worth of the company (shareholders funds) as a percentage of total current and tangible assets.

Creditor Days

Trade Creditors / Turnover x 365 days. This is a calculation that predicts the average time taken for the company to settle its invoices for goods and services provided by it suppliers.

Debtor Days

Trade Debtors / Turnover x 365 days. This is a calculation that predicts the average time taken for the company to collect its invoices for goods and services provided to its customers.

Liquidity/Acid Test

Current assets - Stocks/Current Liabilities. This, like the current ratio, measures how quickly in the short term a company can meet its debts. However, this ratio excludes stock as there is no guarantee the value of Stocks can be realised quickly.

Return On Capital Employed %

Pre-Tax Profit / Capital Employed x 100. This ratio measures the profits a business yields in return for the money (Capital) invested.

Return On Total Assets Employed %

Pre-Tax Profits / Total Assets x 100. This shows the 'return' or 'profit' on each pound of Assets used as a percentage.

Current Debt Ratio

Total Current Liabilities / Shareholders Funds. This measures the amount of short term debt in relation to the value of shareholders funds.

Total Debt Ratio

Total Short Term & Long Term Debt / Shareholder Funds. This shows the relative indebtedness of a company in relation to the worth of the company.

Stock Turnover Ratio %

Stocks / Turnover x 100. This shows the number of times the trading stock of a company is "turned over" in a trading period. If the ratio is low this indicates that relatively little money is tied up in Stocks.

Return on Net Assets Employed %

Pre-Tax Profits / Net Assets x 100. This shows the return in percent on the net assets of the company. The higher the percentage the more profitable the company.

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