3.17 Interpretation, analysis and communication of accounting information


Additional information

How accounting techniques, measures and ratios are used to analyse and interpret accounting information (both financial and management) and the limitations of using financial statement and ratio analysis when assessing business performance.

Techniques, measures and ratios include those listed in analysis and evaluation of financial information and also investors’ ratios:

  • dividend yield
  • earnings per share
  • dividend cover
  • price earnings
  • interest cover.

How performance is evaluated both internally and across accounting periods and externally in comparison to competitors.

The focus on performance could include:

  • profitability
  • liquidity
  • efficiency
  • capital structure.

The difference between cash and profits and the effect of transactions on profitability and liquidity.


The interests of stakeholders and importance of effective communication to both internal and external stakeholders.

Internal stakeholders are:

  • employees
  • management
  • owners/shareholders.

External stakeholders are:

  • customers
  • suppliers
  • government
  • lenders
  • local community.

Value of published accounts to relevant stakeholders.

The impact, advantages and disadvantages of systems of recording data.

  • Features and main applications of accounting software.
  • Advantages and disadvantages of computerised systems for recording accounting data compared to manual methods.
  • Advantages and disadvantages of single entry and double entry recording systems.

The critical assessment of recommendations and their impact on stakeholders, the local and national economy and the environment.