QCE Accounting - Unit 4 - Performance analysis of a public company
Report Writing and Performance Evaluation | QCE Accounting
Learn how to write Accounting business report responses using evidence, analysis, evaluation, recommendations, limitations and stakeholder judgement.
Updated 2026-05-18 - 4 min read
QCAA official coverage - Accounting 2025 v1.2
Exact syllabus points covered
- Analyse and evaluate financial statements, ratios, trends and benchmarks to make accounting judgements.
- Create business report responses that communicate accounting meaning using data and financial terminology.
- Evaluate proposed changes and recommendations from stakeholder perspectives.
- Explain limitations of financial analysis and the need for non-financial information.
Accounting responses must do more than calculate. The highest-value marks usually come from analysis, evaluation and communication. A business report should use evidence from statements, ratios, budgets, benchmarks and qualitative information to reach a justified judgement.
The structure can be simple: identify the issue, analyse the evidence, evaluate significance and make a recommendation if required. The writing should be specific enough that the reader can see exactly which data supports the conclusion.
Original Sylligence diagram for accounting report writing structure.
From calculation to analysis
| Weak response | Stronger response | |---|---| | The current ratio increased, so liquidity improved. | The current ratio increased from 1.4:1 to 2.1:1, but most of the increase came from inventory. Because inventory turnover slowed from 48 days to 73 days, the improvement may not translate into stronger cash availability. | | Net profit ratio decreased. | Net profit ratio fell from 12 percent to 8 percent despite stable gross profit ratio, indicating that operating expenses rose faster than sales. Management should investigate wages, advertising and administration costs. | | Debt is bad. | Debt-to-equity increased from 0.8:1 to 1.6:1, increasing financial risk. However, times interest earned remains 6.5 times, so the debt may be manageable if operating cash flows remain stable. |
Evaluation criteria
Use criteria that match the decision. Common criteria include profitability, liquidity, stability, cash flow, risk, cost, control, reliability, stakeholder impact, feasibility and long-term sustainability.
For example, a proposal to buy equipment should be evaluated against cash impact, expected productivity gains, depreciation, maintenance costs, financing, effect on capacity and risk of obsolescence. A proposal to tighten credit terms should be judged against faster cash collection, possible lost sales and customer relationships.
Recommendations
A recommendation should follow from the evidence. It should be practical, targeted and connected to the problem. If accounts receivable turnover has worsened, "advertise more" is unlikely to solve the issue. Better recommendations include revised credit checks, early payment discounts, stricter follow-up, credit limits or online payment options.
Recommendations can be short, but they should include reason:
| Problem | Better recommendation | |---|---| | Slow receivables | Introduce automated reminders after 14 days and suspend credit for accounts over 45 days to improve operating cash flow | | Excess inventory | Use sales trend data to reduce reorder quantities for slow-moving items and free cash tied up in stock | | Weak interest cover | Delay discretionary expansion or refinance debt to reduce short-term repayment pressure | | Poor data control | Require multi-factor authentication and monthly user access reviews to reduce unauthorised accounting system access |
Limitations and non-financial information
Financial analysis has limits. Ratios are based on past data. Accounting policies can change. One-off events can distort results. Public company market ratios can move because of investor sentiment rather than underlying performance. Benchmarks may be incomplete or based on businesses with different strategies.
Non-financial information may be needed: customer satisfaction, employee turnover, product quality, supply chain risk, environmental performance, cyber incidents, brand strength and management capability. These factors can explain financial trends or warn of future changes.
Report style
Use accounting terminology precisely. Keep calculations visible if required, but do not let calculations replace explanation. A useful paragraph often follows this pattern:
- State the trend or issue.
- Quote the key data.
- Explain the likely cause.
- Explain the consequence for stakeholders.
- Make a judgement or recommendation.