2.1 Financial Statements

Module 2.1 review and final assessment

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Case briefing video coming soon

Apply Financial Statements

Read the full narration

You have now built the tools in Financial Statements. The next task is to apply them to the supplied fictional case. Start with the objective and constraints. Record your first decision and the evidence supporting it. Work the numbers using consistent definitions and units. Invite the strongest reasonable challenge. When new information arrives, keep your first record and explain what changes. Finish with a conditional conclusion: what you would do, why, what remains uncertain and what evidence would trigger a review. This is a teaching exercise with fictional information. The quality of your reasoning matters more than whether a simulated outcome later looks favourable.

Review financial statements.

Twenty questions in four groups of five: foundations, calculation, interpretation and judgement. Attempt all questions in your notes, then open explanations. Aim for 16/20, revisit misunderstandings and retry. This website version is self-marked practice.

Check your understanding · choose one

A £100,000 machine has no residual value and a five-year useful life. Annual straight-line depreciation is…

Correct. 100,000 / 5 = 20,000.

Reconsider this choice. 100,000 / 5 = 20,000. Try another answer.

Check your understanding · choose one

A £20m credit sale with £15m collected leaves…

Correct. Uncollected consideration is a receivable under the isolated assumptions.

Reconsider this choice. Uncollected consideration is a receivable under the isolated assumptions. Try another answer.

Check your understanding · choose one

Harbour revenue 240 less cost of sales 144 gives…

Correct. 240 − 144 = 96.

Reconsider this choice. 240 − 144 = 96. Try another answer.

Check your understanding · choose one

Operating profit 36 plus depreciation 6 gives simplified EBITDA…

Correct. D&A is added back to that profit measure, not turned into cash.

Reconsider this choice. D&A is added back to that profit measure, not turned into cash. Try another answer.

Check your understanding · choose one

PBT 32 and tax expense 8 gives profit…

Correct. 32 − 8 = 24.

Reconsider this choice. 32 − 8 = 24. Try another answer.

Check your understanding · choose one

Profit 24 and 24m weighted-average shares gives EPS…

Correct. 24/24 = 1.

Reconsider this choice. 24/24 = 1. Try another answer.

Check your understanding · choose one

Revenue 200 to 240 grows by…

Correct. 40/200 = 20%.

Reconsider this choice. 40/200 = 20%. Try another answer.

Check your understanding · choose one

Operating margin 17% to 15% changes by…

Correct. The arithmetic percentage-point difference is −2.

Reconsider this choice. The arithmetic percentage-point difference is −2. Try another answer.

Check your understanding · choose one

Harbour current ROCE under the stated AQA definition is…

Correct. 36 / (100 + 50) = 24%.

Reconsider this choice. 36 / (100 + 50) = 24%. Try another answer.

Check your understanding · choose one

Gearing with non-current liabilities 50 and equity 100 is…

Correct. 50/(100+50) × 100 = 33.33%.

Reconsider this choice. 50/(100+50) × 100 = 33.33%. Try another answer.

Check your understanding · choose one

Net profit 24, D&A 6, AR +8, inventory +4, AP +3 gives OCF…

Correct. 24+6−8−4+3 = 21.

Reconsider this choice. 24+6−8−4+3 = 21. Try another answer.

Check your understanding · choose one

OCF 21 minus capex 12 gives the stated simple FCF…

Correct. Subtract capex once.

Reconsider this choice. Subtract capex once. Try another answer.

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Borrow 5, repay 4 and distribute 6 gives financing cash flow…

Correct. 5−4−6 = −5.

Reconsider this choice. 5−4−6 = −5. Try another answer.

Check your understanding · choose one

Current assets 110 / current liabilities 50 gives…

Correct. 110/50 = 2.2.

Reconsider this choice. 110/50 = 2.2. Try another answer.

Check your understanding · choose one

PP&E opening 84 + capex 12 − depreciation 6 closes at…

Correct. 84+12−6 = 90.

Reconsider this choice. 84+12−6 = 90. Try another answer.

Check your understanding · choose one

Equity opening 82 + profit 24 − dividends 6 closes at…

Correct. 82+24−6 = 100 under the stated exclusions.

Reconsider this choice. 82+24−6 = 100 under the stated exclusions. Try another answer.

Check your understanding · choose one

A model balancing after an unexplained plug…

Correct. A plug can conceal errors.

Reconsider this choice. A plug can conceal errors. Try another answer.

Check your understanding · choose one

A current ratio above 2 establishes…

Correct. Asset quality, maturity dates and cash access still matter.

Reconsider this choice. Asset quality, maturity dates and cash access still matter. Try another answer.

Check your understanding · choose one

Accounting tax expense and cash tax paid…

Correct. Recognition and payment timing need reconciliation.

Reconsider this choice. Recognition and payment timing need reconciliation. Try another answer.

Check your understanding · choose one

The forecast base EPS £1.41 should be presented…

Correct. Conditional forecasts require evidence and transparent sensitivity.

Reconsider this choice. Conditional forecasts require evidence and transparent sensitivity. Try another answer.

The financial-quality committee

Write 300–450 words assessing whether Harbour’s 20% revenue growth supports confidence in its financial performance. Use the complete historical dataset in the practice lab and the base/downside forecast in lesson 2.1.8.

  • Calculate and interpret growth and at least two margins.
  • Reconcile profit, operating cash, capex and closing cash.
  • Use one liquidity or financing measure and explain its limitation.
  • Compare the forecast cases, identify two missing pieces of evidence and state a conditional judgement.

Original practice rubric · 15 marks

  • Evidence and arithmetic (4 marks): Correct calculations, units, source trail and clearly stated assumptions.
  • Analysis (4 marks): Explains business mechanisms and connects the statements or valuation drivers.
  • Balanced judgement (4 marks): Addresses a credible alternative, weighs limitations and reaches a conditional conclusion.
  • Communication and review (3 marks): A clear note with prioritised missing evidence and observable review triggers.
Indicative response after your own attempt

Revenue grows 20% but EBIT only 5.88%; margin falls from 17% to 15%. OCF21 versus profit24 reflects stated timing items; simple FCF9 covers dividend6 historically, with maturities and future capex still needing review. Current ratio2.2 includes receivables/inventory, so it is not a cash guarantee. Base EPS1.41 versus downside0.87 shows sensitivity. A strong note would investigate customer collections, cost mix and capacity before treating growth as proof of improved quality.

This is an On Judgement classroom rubric, not an official AQA mark scheme.

What comes next

Continue to Valuation: use your statement knowledge to investigate what a business may be worth.

Continue to Valuation