Financial Statement Terms

Amounts owed to suppliers for goods or services received.

Example: The manufacturer has 60 days to pay its raw-material supplier.

Accounts Payable describes amounts owed to suppliers for goods or services received; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

The manufacturer has 60 days to pay its raw-material supplier.

Do not isolate Accounts Payable; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Classification choices can change ratios without changing the underlying economics.

Amounts customers owe for goods or services already delivered.

Example: A customer has 30 days to pay a ₦10 million invoice.

Accounts Receivable describes amounts customers owe for goods or services already delivered; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

A customer has 30 days to pay a ₦10 million invoice.

For Accounts Receivable, read the accounting policy and note disclosureThe provision of material information needed for informed decisions., compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; accounting profit can rise while cash generation weakens.

An expense recognised before the related cash payment is made.

Example: Employee bonuses earned this year but paid next year are accrued.

Accrued Expense is an expense recognised before the related cash payment is made; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

Employee bonuses earned this year but paid next year are accrued. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

A reliable review of Accrued Expense compares reported growth with cash generation and balance-sheet movement, then explains every material divergence. Also compare Deferred Revenue, defined here as cash received before the related goods or services are delivered.

Profit modified to exclude items management or analysts consider unusual, non-recurring, or non-core.

Example: The company excludes a one-time asset-sale gain from adjusted earnings.

Adjusted Earnings means profit modified to exclude items management or analysts consider unusual, non-recurring, or non-core; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

The company excludes a one-time asset-sale gain from adjusted earnings.

A reliable review of Adjusted Earnings compares reported growth with cash generation and balance-sheet movement, then explains every material divergence.

An audit opinion stating that material misstatements are pervasive and the statements are not fairly presented.

Example: The adverse opinion warns investors not to rely on the accounts as presented.

Adverse Audit Opinion is an audit opinion stating that material misstatements are pervasive and the statements are not fairly presented. The accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

The adverse opinion warns investors not to rely on the accounts as presented.

Do not isolate Adverse Audit Opinion; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Accounting profit can rise while cash generation weakens.

An estimate of receivables that may not be collected.

Example: The company records a loss allowance against overdue customer balances.

Allowance for Doubtful Accounts is an estimate of receivables that may not be collected; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

The company records a loss allowance against overdue customer balances.

For Allowance for Doubtful Accounts, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; accounting profit can rise while cash generation weakens.

The systematic allocation of an intangible assetA non-physical asset that can create economic value.'s cost over its useful life.

Example: A software licence is amortised over five years.

Amortisation is the systematic allocation of an intangible asset's cost over its useful life; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

A software licence is amortised over five years.

Do not isolate Amortisation; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Management-adjusted measures may exclude costs that still affect shareholders.

An auditor's formal conclusion on whether financial statements are presented fairly under the applicable framework.

Example: Investors read the audit opinion before relying on the accounts.

Audit Opinion is an auditor's formal conclusion on whether financial statements are presented fairly under the applicable framework; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

For example, investors read the audit opinion before relying on the accounts.

Do not isolate Audit Opinion; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Classification choices can change ratios without changing the underlying economics.

A statement showing assets, liabilities, and equity at a particular date.

Example: The balance sheet reports what the company owns and owes at year-end.

Balance Sheet is a statement showing assets, liabilities, and equity at a particular date; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

The balance sheet reports what the company owns and owes at year-end.

For Balance Sheet, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; accounting profit can rise while cash generation weakens.

Money spent to acquire or improve long-term assets.

Example: The company spends ₦2 billion on a new production line.

Capital Expenditure means money spent to acquire or improve long-term assets; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

The company spends ₦2 billion on a new production line. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

For Capital Expenditure, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend. Also compare Depreciation, defined here as the systematic allocation of a tangible assetA physical asset with measurable economic value.'s cost over its useful life.

Cash plus highly liquid short-term investments with insignificant value-change risk.

Example: The company holds bank balances and three-month Treasury bills.

Cash and Cash Equivalents means cash plus highly liquid short-term investments with insignificant value-change risk; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

The company holds bank balances and three-month Treasury bills.

Do not isolate Cash and Cash Equivalents; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Management-adjusted measures may exclude costs that still affect shareholders.

A statement explaining cash generated and used in operating, investing, and financing activities.

Example: The cash flow statement shows whether reported profit converted into cash.

Cash Flow Statement is a statement explaining cash generated and used in operating, investing, and financing activities; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

The cash flow statement shows whether reported profit converted into cash.

For Cash Flow Statement, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; classification choices can change ratios without changing the underlying economics.

Direct costs attributable to goods or services sold during a period.

Example: A manufacturer includes raw materials and production labour in cost of goods sold.

Cost of Goods Sold describes direct costs attributable to goods or services sold during a period; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

A manufacturer includes raw materials and production labour in cost of goods sold. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

For Cost of Goods Sold, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; management-adjusted measures may exclude costs that still affect shareholders.

Assets expected to be realised, sold, or used within the normal operating cycle or about one year.

Example: Cash, receivables, and inventory are current assets.

Current Assets describes assets expected to be realised, sold, or used within the normal operating cycle or about one year. The accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

For example, cash, receivables, and inventory are current assets. For Current Assets, trend, comparability and the relationship with cash are what make it useful for investmentAn asset or commitment of money made with the expectation of future income, growth, or both. analysis.

Do not isolate Current Assets; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard.

Obligations expected to be settled within the normal operating cycle or about one year.

Example: Accounts payable and short-term debt are current liabilities.

Current Liabilities describes obligations expected to be settled within the normal operating cycle or about one year; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

Accounts payable and short-term debt are current liabilities.

Analyse Current Liabilities through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. One-off items and estimates can dominate a single reporting period.

Cash received before the related goods or services are delivered.

Example: An annual software subscriptionThe process of buying new units in a fund by submitting money and a valid instruction. paid upfront is recognised as revenue over time.

Deferred Revenue means cash received before the related goods or services are delivered; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

An annual software subscription paid upfront is recognised as revenue over time.

For Deferred Revenue, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; management-adjusted measures may exclude costs that still affect shareholders.

Tax expected to be paid in future because accounting and tax treatments differ temporarily.

Example: Accelerated tax depreciation creates a deferred tax liability.

Deferred Tax Liability means tax expected to be paid in future because accounting and tax treatments differ temporarily; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

Accelerated tax depreciation creates a deferred tax liability. For Deferred Tax Liability, trend, comparability and the relationship with cash are what make it useful for investment analysis.

Analyse Deferred Tax Liability through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Classification choices can change ratios without changing the underlying economics.

The systematic allocation of a tangible asset's cost over its useful life.

Example: A machine's cost is expensed over ten years through depreciation.

Depreciation is the systematic allocation of a tangible asset's cost over its useful life; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

A machine's cost is expensed over ten years through depreciation. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Do not isolate Depreciation; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Also compare Amortisation, defined here as the systematic allocation of an intangible asset's cost over its useful life.

Profit before interest expense and income tax, commonly abbreviated EBIT.

Example: EBIT allows analysts to compare operations before financing and tax differences.

Earnings Before Interest and Taxes means profit before interest expense and income tax, commonly abbreviated EBIT; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

EBIT allows analysts to compare operations before financing and tax differences. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Analyse Earnings Before Interest and Taxes through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. One-off items and estimates can dominate a single reporting period.

The percentage change in profit or earnings per shareNet income attributable to ordinary shareholders divided by weighted average ordinary shares. over a period.

Example: EPS rises from ₦4 to ₦5, producing 25% earnings growth.

Earnings Growth is the percentage change in profit or earnings per share over a period; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

For a percentage form, Earnings Growth is generally calculated as the change divided by the starting value, multiplied by 100. For example, EPS rises from ₦4 to ₦5, producing 25% earnings growth.

A reliable review of Earnings Growth compares reported growth with cash generation and balance-sheet movement, then explains every material divergence; management-adjusted measures may exclude costs that still affect shareholders.

Earnings before interest, tax, depreciation, and amortisation.

Example: A company reports ₦800 million EBITDA before non-cash depreciation and amortisation.

EBITDA means earnings before interest, tax, depreciation, and amortisation; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

A company reports ₦800 million EBITDA before non-cash depreciation and amortisation.

Analyse EBITDA through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Also compare Amortisation, defined here as the systematic allocation of an intangible asset's cost over its useful life.

Cash flows arising from debt, equity, dividends, and other financing transactions.

Example: Issuing bonds creates financing cash inflow while repaying debt creates outflow.

Financing Cash Flow means cash flows arising from debt, equity, dividends, and other financing transactions; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

For example, issuing bonds creates financing cash inflow while repaying debt creates outflow. For Financing Cash Flow, trend, comparability and the relationship with cash are what make it useful for investment analysis.

A reliable review of Financing Cash Flow compares reported growth with cash generation and balance-sheet movement, then explains every material divergence; classification choices can change ratios without changing the underlying economics.

Cash remaining after operating cash flow and necessary capital expenditure, under the stated definition.

Example: ₦800 million operating cash flow less ₦300 million capital expenditure gives ₦500 million free cash flow.

Free Cash Flow means cash remaining after operating cash flow and necessary capital expenditure, under the stated definition; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

For Free Cash Flow, a common formulation subtracts capital expenditure from operating cash flow, although analysts may adjust both components for unusual items. ₦800 million operating cash flow less ₦300 million capital expenditure gives ₦500 million free cash flow. Trend, comparability and the relationship with cash are what make it useful for investment analysis.

For Free Cash Flow, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend.

Cash flow available to ordinary shareholders after operating needs, investment, and net debtInterest-bearing debt minus cash and cash equivalents. flows.

Example: An equity analyst discounts FCFE at the cost of equityThe return required by equity investors for bearing ownership risk..

Free Cash Flow to Equity means cash flow available to ordinary shareholders after operating needs, investment, and net debt flows. FCFE already reflects net borrowing and is discounted at the cost of equity, producing an estimate of equity value directly.

An equity analyst discounts FCFE at the cost of equity.

For Free Cash Flow to Equity, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; classification choices can change ratios without changing the underlying economics.

Cash flow available to all capital providers before debt payments.

Example: An analyst discounts FCFF using the weighted average cost of capitalThe blended required return of debt and equity capital, weighted by their market values..

Free Cash Flow to Firm means cash flow available to all capital providers before debt payments. FCFF is valued before debt payments and is discounted at the weighted average cost of capital; the resulting enterprise valueThe value of a company's operations attributable to debt and equity investors, commonly market capitalisation plus net debt and other claims. must be adjusted for debt and cash to reach equity value.

An analyst discounts FCFF using the weighted average cost of capital. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

A reliable review of Free Cash Flow to Firm compares reported growth with cash generation and balance-sheet movement, then explains every material divergence; classification choices can change ratios without changing the underlying economics.

A disclosure indicating substantial doubt about an entity's ability to continue operating.

Example: The auditor highlights debt maturities and insufficient cash.

Going-Concern Warning is a disclosure indicating substantial doubt about an entity's ability to continue operating; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

The auditor highlights debt maturities and insufficient cash.

Analyse Going-Concern Warning through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. One-off items and estimates can dominate a single reporting period.

An acquisitionThe purchase of control or ownership of a company or business. asset representing the excess purchase price over the fair valueAn estimate of an asset's appropriate value under specified assumptions or accounting standards. of identifiable net assets.

Example: A buyer pays above book valueThe accounting value of shareholders' equity. for expected synergies and records goodwill.

Goodwill is an acquisition asset representing the excess purchase price over the fair value of identifiable net assets; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

A buyer pays above book value for expected synergies and records goodwill.

Do not isolate Goodwill; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Classification choices can change ratios without changing the underlying economics.

Revenue minus the direct cost of goods or services sold.

Example: Revenue of ₦1 billion less ₦600 million of direct costs gives ₦400 million gross profit.

Gross Profit means revenue minus the direct cost of goods or services sold; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

Revenue of ₦1 billion less ₦600 million of direct costs gives ₦400 million gross profit. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Analyse Gross Profit through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. One-off items and estimates can dominate a single reporting period.

A reduction in an asset's carrying valueThe amount at which an asset or liability appears in financial statements. when expected recoverable value falls below it.

Example: Weak demand causes the company to impair a factory.

Impairment is a reduction in an asset's carrying value when expected recoverable value falls below it; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

Weak demand causes the company to impair a factory.

Do not isolate Impairment; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Classification choices can change ratios without changing the underlying economics.

A statement showing revenue, expenses, and profit over a period.

Example: The income statement covers the twelve months ended 31 December.

Income Statement is a statement showing revenue, expenses, and profit over a period; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

The income statement covers the twelve months ended 31 December.

Analyse Income Statement through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. One-off items and estimates can dominate a single reporting period.

Non-physical resources such as patents, licences, brands, and software.

Example: An acquired customer relationship is recorded as an intangible asset.

Intangible Assets describes non-physical resources such as patents, licences, brands, and software; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

For example, an acquired customer relationship is recorded as an intangible asset. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Do not isolate Intangible Assets; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Accounting profit can rise while cash generation weakens.

Goods held for sale, production, or consumption in the production process.

Example: A retailer reports merchandise awaiting sale as inventory.

Inventory describes goods held for sale, production, or consumption in the production process; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

A retailer reports merchandise awaiting sale as inventory.

For Inventory, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend. Also compare Prepaid Expense, defined here as a payment made in advance for a future service or benefit.

Cash used for or received from buying and selling long-term assets and investments.

Example: Purchasing equipment produces an investing cash outflow.

Investing Cash Flow means cash used for or received from buying and selling long-term assets and investments; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

For example, purchasing equipment produces an investing cash outflow. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Analyse Investing Cash Flow through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Accounting profit can rise while cash generation weakens.

The present valueThe current worth of money expected in the future after applying a discount rate. of future lease payments recognised as an obligation.

Example: A five-year office lease creates a lease liability.

Lease Liability is the present value of future lease payments recognised as an obligation; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

For example, a five-year office lease creates a lease liability.

Do not isolate Lease Liability; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Management-adjusted measures may exclude costs that still affect shareholders.

Borrowings due more than one year from the reporting date.

Example: A ten-year bond is classified as long-term debt.

Long-Term Debt describes borrowings due more than one year from the reporting date; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

A ten-year bond is classified as long-term debt. For Long-Term Debt, trend, comparability and the relationship with cash are what make it useful for investment analysis.

Do not isolate Long-Term Debt; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Classification choices can change ratios without changing the underlying economics.

The portion of a consolidated subsidiary's equity not owned by the parent company.

Example: The parent owns 80% and recognises the remaining 20% as minority interest.

Minority Interest is the portion of a consolidated subsidiary's equity not owned by the parent company; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

The parent owns 80% and recognises the remaining 20% as minority interest.

Analyse Minority Interest through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Management-adjusted measures may exclude costs that still affect shareholders.

Profit remaining after operating costs, financing costs, taxes, and other recognised items.

Example: The company earns ₦120 million net income for the year.

Net Income means profit remaining after operating costs, financing costs, taxes, and other recognised items; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

The company earns ₦120 million net income for the year.

Analyse Net Income through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Also compare Earnings Before Interest and Taxes, defined here as profit before interest expense and income tax, commonly abbreviated EBIT.

Current assets minus current liabilities, or a narrower operating version where stated.

Example: ₦1 billion current assets less ₦700 million current liabilities gives ₦300 million.

Net Working Capital describes current assets minus current liabilities, or a narrower operating version where stated; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

₦1 billion current assets less ₦700 million current liabilities gives ₦300 million. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

For Net Working Capital, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend.

The current accounting term for equity in a subsidiary not attributable to the parent.

Example: Consolidated profit is divided between parent owners and non-controlling interests.

Non-Controlling Interest is the current accounting term for equity in a subsidiary not attributable to the parent; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

Consolidated profit is divided between parent owners and non-controlling interests. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Analyse Non-Controlling Interest through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Management-adjusted measures may exclude costs that still affect shareholders.

Assets expected to remain in use or be held for more than one year.

Example: Factories, long-term investments, and goodwill are non-current assets.

Non-Current Assets describes assets expected to remain in use or be held for more than one year; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

Factories, long-term investments, and goodwill are non-current assets. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Analyse Non-Current Assets through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Classification choices can change ratios without changing the underlying economics.

Obligations due beyond one year.

Example: Long-term bonds and pension obligations are non-current liabilities.

Non-Current Liabilities describes obligations due beyond one year; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

For example, long-term bonds and pension obligations are non-current liabilities.

Do not isolate Non-Current Liabilities; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Management-adjusted measures may exclude costs that still affect shareholders; Also compare Accounts Payable, defined here as amounts owed to suppliers for goods or services received.

An income or expense item not expected to occur regularly.

Example: A one-time factory-sale gain is a non-recurring item.

Non-Recurring Item is an income or expense item not expected to occur regularly; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

For example, a one-time factory-sale gain is a non-recurring item. For Non-Recurring Item, trend, comparability and the relationship with cash are what make it useful for investment analysis.

Do not isolate Non-Recurring Item; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Accounting profit can rise while cash generation weakens.

An expense described as unusual or unlikely to recur.

Example: A restructuringA significant change to a company's debt, operations, ownership, or organisation intended to improve viability. programme creates a one-off charge.

One-Off Charge is an expense described as unusual or unlikely to recur; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

A restructuring programme creates a one-off charge.

Do not isolate One-Off Charge; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Also compare Pro Forma Earnings, defined here as earnings adjusted or presented as though specified transactions or assumptions had occurred.

Cash generated or used by a company's core operations.

Example: A company earns ₦500 million profit but produces only ₦200 million operating cash flow.

Operating Cash Flow means cash generated or used by a company's core operations; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

A company earns ₦500 million profit but produces only ₦200 million operating cash flow. For Operating Cash Flow, trend, comparability and the relationship with cash are what make it useful for investment analysis.

For Operating Cash Flow, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; management-adjusted measures may exclude costs that still affect shareholders.

A cost incurred in running a business that is not directly included in cost of goods sold.

Example: Salaries, rent, marketing, and administrative costs are operating expenses.

Operating Expense is a cost incurred in running a business that is not directly included in cost of goods sold. The accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

Salaries, rent, marketing, and administrative costs are operating expenses. For Operating Expense, trend, comparability and the relationship with cash are what make it useful for investment analysis.

For Operating Expense, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; classification choices can change ratios without changing the underlying economics.

Profit from core operations after operating expenses but before financing costs and tax.

Example: Gross profit of ₦500 million less ₦300 million operating expenses gives ₦200 million operating profit.

Operating Profit means profit from core operations after operating expenses but before financing costs and tax; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

Gross profit of ₦500 million less ₦300 million operating expenses gives ₦200 million operating profit. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

For Operating Profit, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend.

A payment made in advance for a future service or benefit.

Example: A one-year insurance premium is initially recorded as a prepaid expense.

Prepaid Expense is a payment made in advance for a future service or benefit; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

A one-year insurance premium is initially recorded as a prepaid expense. For Prepaid Expense, trend, comparability and the relationship with cash are what make it useful for investment analysis.

A reliable review of Prepaid Expense compares reported growth with cash generation and balance-sheet movement, then explains every material divergence; one-off items and estimates can dominate a single reporting period.

Earnings adjusted or presented as though specified transactions or assumptions had occurred.

Example: The company shows combined results as if an acquisition happened at the year's start.

Pro Forma Earnings means earnings adjusted or presented as though specified transactions or assumptions had occurred; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

The company shows combined results as if an acquisition happened at the year's start.

Do not isolate Pro Forma Earnings; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. One-off items and estimates can dominate a single reporting period.

Long-lived tangible assets used in business operations.

Example: A factory, machinery, vehicles, and office buildings are PP&E.

PropertyLand and buildings held for use, rent, development, or capital appreciation., Plant and Equipment describes long-lived tangible assets used in business operations; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

A factory, machinery, vehicles, and office buildings are PP&E.

For Property, Plant and Equipment, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; classification choices can change ratios without changing the underlying economics.

An audit opinion identifying a material issue that is not pervasive to the financial statements.

Example: The auditor cannot verify one inventory balance and qualifies the opinion.

Qualified Audit Opinion is an audit opinion identifying a material issue that is not pervasive to the financial statements. The accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

The auditor cannot verify one inventory balance and qualifies the opinion.

A reliable review of Qualified Audit Opinion compares reported growth with cash generation and balance-sheet movement, then explains every material divergence; management-adjusted measures may exclude costs that still affect shareholders.

Disclosure of transactions and balances involving connected persons or entities.

Example: The annual reportA yearly publication containing financial statements, management discussion, governance information, and other disclosures. lists loans to a director-controlled company.

Related-Party Disclosure describes disclosure of transactions and balances involving connected persons or entities; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

The annual report lists loans to a director-controlled company.

Analyse Related-Party Disclosure through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Accounting profit can rise while cash generation weakens.

Spending on creating or improving products, services, and technology.

Example: A pharmaceutical company spends heavily on research and clinical trials.

Research and Development Expense describes spending on creating or improving products, services, and technology; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

A pharmaceutical company spends heavily on research and clinical trials. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Analyse Research and Development Expense through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Accounting profit can rise while cash generation weakens.

A revision of previously issued financial statements to correct an error or apply required changes.

Example: The company restates revenue after discovering improper recognition.

Restatement is a revision of previously issued financial statements to correct an error or apply required changes; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

The company restates revenue after discovering improper recognition. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

For Restatement, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend.

Cumulative profit kept in the business rather than distributed to shareholders.

Example: A profitable company retains earnings to finance expansion.

Retained Earnings describes cumulative profit kept in the business rather than distributed to shareholders; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

A profitable company retains earnings to finance expansion.

A reliable review of Retained Earnings compares reported growth with cash generation and balance-sheet movement, then explains every material divergence; accounting profit can rise while cash generation weakens.

Income generated from selling goods or services before expenses are deducted.

Example: A software company reports ₦5 billion in annual revenue.

Revenue describes income generated from selling goods or services before expenses are deducted; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

A software company reports ₦5 billion in annual revenue. For Revenue, trend, comparability and the relationship with cash are what make it useful for investment analysis.

Analyse Revenue through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Also compare Cost of Goods Sold, defined here as direct costs attributable to goods or services sold during a period.

The percentage increase or decrease in revenue over a period.

Example: Revenue rises from ₦4 billion to ₦5 billion, producing 25% sales growth.

Sales Growth is the percentage increase or decrease in revenue over a period; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

Revenue rises from ₦4 billion to ₦5 billion, producing 25% sales growth.

Do not isolate Sales Growth; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Management-adjusted measures may exclude costs that still affect shareholders.

Financial information presented separately for significant business lines or geographic areas.

Example: The group reports banking and insurance segments independently.

Segment Reporting describes financial information presented separately for significant business lines or geographic areas; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

The group reports banking and insurance segments independently.

Analyse Segment Reporting through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Classification choices can change ratios without changing the underlying economics.

Operating costs associated with sales, management, and general administration.

Example: The company reports advertising and head-office salaries as SG&A.

Selling, General and Administrative Expense describes operating costs associated with sales, management, and general administration; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

The company reports advertising and head-office salaries as SG&A.

Do not isolate Selling, General and Administrative Expense; link it to revenue, margins, working capital, debt and cash flow, and compare the definition used by management with the accounting standard. Accounting profit can rise while cash generation weakens.

The amount recognised as capital from issued sharesShares that a company has formally created and allocated to shareholders. under applicable accounting and legal rules.

Example: A new share issue increases share capital and share premium.

Share Capital is the amount recognised as capital from issued shares under applicable accounting and legal rules; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

A new share issue increases share capital and share premium.

A reliable review of Share Capital compares reported growth with cash generation and balance-sheet movement, then explains every material divergence.

The residual interest in assets after liabilities are deducted.

Example: Assets of ₦10 billion less liabilities of ₦6 billion leave ₦4 billion equity.

Shareholders' Equity is the residual interest in assets after liabilities are deducted; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

Assets of ₦10 billion less liabilities of ₦6 billion leave ₦4 billion equity. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

Analyse Shareholders' Equity through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality.

The amount received above the nominal or par valueThe stated value of a bond or share, often used as the amount repaid at bond maturity. of issued shares.

Example: Shares issued at ₦10 with ₦1 par value create ₦9 share premium per share.

Share Premium is the amount received above the nominal or par value of issued shares; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

For example, shares issued at ₦10 with ₦1 par value create ₦9 share premium per share.

For Share Premium, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; accounting profit can rise while cash generation weakens.

Borrowings due within one year.

Example: A 90-day bank facility appears as short-term debt.

Short-Term Debt describes borrowings due within one year; the usefulness of the accounting measure depends on the accounting policy, reporting period and management estimates behind the reported number.

For example, a 90-day bank facility appears as short-term debt. For Short-Term Debt, trend, comparability and the relationship with cash are what make it useful for investment analysis.

For Short-Term Debt, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; classification choices can change ratios without changing the underlying economics. Also compare Long-Term Debt, defined here as borrowings due more than one year from the reporting date.

A statement reconciling opening and closing shareholders' equity.

Example: Dividends, profit, share issues, and reserves change total equity.

Statement of Changes in Equity is a statement reconciling opening and closing shareholders' equity; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

Dividends, profit, share issues, and reserves change total equity. For Statement of Changes in Equity, trend, comparability and the relationship with cash are what make it useful for investment analysis.

For Statement of Changes in Equity, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; classification choices can change ratios without changing the underlying economics.

The sum of resources controlled by an entity that are expected to provide economic benefits.

Example: Cash, receivables, inventory, property, and investments make up total assets.

Total Assets is the sum of resources controlled by an entity that are expected to provide economic benefits; timing and classification matter: cash movement, revenue recognition, expense matching and balance-sheet presentation may occur in different periods.

Cash, receivables, inventory, property, and investments make up total assets.

Analyse Total Assets through both the primary statement and its notes; check recognition rules, estimates, non-cash items, related-party effects and consistency with operating reality. Accounting profit can rise while cash generation weakens.

All present obligations owed by an entity.

Example: Loans, payables, taxes due, and lease obligations form total liabilities.

Total Liabilities describes all present obligations owed by an entity; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

Loans, payables, taxes due, and lease obligations form total liabilities. The numbers show the reported effect, while notes to the accounts explain assumptions, classifications and movements that the face of the statement may conceal.

For Total Liabilities, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; management-adjusted measures may exclude costs that still affect shareholders.

An audit opinion stating that financial statements are fairly presented without material qualification.

Example: The auditor issues an unqualified opinion on the annual accounts.

Unqualified Audit Opinion is an audit opinion stating that financial statements are fairly presented without material qualification; the accounting measure is part of the system used to record, classify and explain a company's financial position or performance. Its accounting definition determines when an amount is recognised.

The auditor issues an unqualified opinion on the annual accounts.

For Unqualified Audit Opinion, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend.

Current operating assets minus current operating liabilities, with exact components depending on the analysis.

Example: Inventory and receivables exceed payables by ₦200 million.

Working Capital describes current operating assets minus current operating liabilities, with exact components depending on the analysis; the accounting measure should be reconciled to the other statements because profit, cash flow and changes in assets or liabilities describe different views of the same business.

Inventory and receivables exceed payables by ₦200 million. For Working Capital, trend, comparability and the relationship with cash are what make it useful for investment analysis.

For Working Capital, read the accounting policy and note disclosure, compare several periods, reconcile the figure with cash flow and test whether acquisitions, currency or one-off items distort the trend; one-off items and estimates can dominate a single reporting period.