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ACCA Strategic Professional · Strategic Business Reporting (International) · Analysis and interpretation of financial and non-financial information and measurement of performance

Zeta plc reports a profit margin that has risen for three years. An institutional investor wants to judge whether this growth in profit is likely to continue. Which type of information would be MOST useful in supplementing the historical financial statements for this purpose?

Forward-looking and non-financial information, such as order book data, customer retention and management's strategic commentary, is most useful because investors need to predict whether profits will continue, and historical statements alone only describe past performance.

  1. AForward-looking information such as order book data, customer retention rates and management's strategy commentaryCorrect
  2. BA further year of historical cost depreciation schedules
  3. CThe audit fee disclosed in the notes
  4. DThe list of directors' shareholdings at the year end

Explanation

Investors assessing sustainability of profit need predictive information, such as order books, retention and strategy. Historical statements show past results only. Depreciation schedules, audit fees and shareholdings do not help predict future profit growth.

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