3. General Purpose Financial Stmt Flashcards
BS element
Current, non current
Current assets definition
Expected to be consumed or sold during a normal operation cycle or 12 mo, whichever is longer
Current liability
Expected to be extinguished through the use of current assets or by incurrence of other CL
Current ratio
CA / CL
Quick or acid test ratio
Cash, ST investments, AR / CL
Internally generated GW on BS?
No, expenses
Classify accrued liab, deferred taxes
AL: CL
DT: NCL
What valuation accounts?
Used to increase/decrease BV of an item to current value = adjunct accts
Not all contra or adjunct accts are valuation accts
Examples of valuation accts?
Allowance for uncollectible accts (contra), Valuation allowance (adjunct)
Examples of contra and adjunct accts?
Accum. Depreciation (contra), Bond premium (adjunct), Bond discount (contra)
What’s liquidation value?
MV of net identifiable assets. Remaining after paying off liabilities
What’s market capitalization?
Total value of a firm’s outstanding stock
GW computing using market capitalization
Market capitalization - MV of net identifiable assets
What does expenses provide that losses do not?
Benefits
What does comprehensive income includes?
NI and OCI
Income Stmt structure and presentation for top and bottom parts
Top: income relating to operations, no specific format
Bottom: unrelated to continuing operations, specific presentations, discontinued operations
Operating margin included in single step or multiple step format?
Multiple step
Stmt of comprehensive income can be presented separately or together?
Yes
Individual component of OCI must be reported where?
BS, stmt of OE, or footnote
How many yrs of OE required by SEC?
Three
How to calculate average issue price: par $2, increase in CS $2000, APIC $10,000.
$2000/2=1,000 shares. $10,000/1,000=$10. $2+10=$12
Cash equivalent examples
Treasury bills, money market funds
Is investment in equity securities cash equivalent?
No, because they are not convertible to a known amount
Policy to designate cash equivalent should be disclosed?
Yes. If the policy changes, it’s a change in accounting policy
Presentation of Stmt of CF
OIFF (operating, investing, financing, foreign currency translation)
Can disclosure of non cash activities be on the face of stmt of CF?
No
Which method shows the actual operating activities? Direct or indirect?
Direct method
Divi rcvd which activity?
Operating
Divi pmt, which activity?
Financing
Interest rcvd and pd, which activity?
Operating
Examples of investing activity
Sales/purchase of LT assets, collection of loan principal, purchase/disposals of debt/equity securities, lending,
Examples of financing activity
Sale/purchase of own stock, proceeds from borrowing, paying back lenders
Stmt of CF: add back
Depreciation, regular amortization, depletion, losses, increase in unearned revenue
CF: subtract
Gains, amortization on discount on bond investment, premium on bond payable, increase in CA, decrease in CL, decrease in unearned revenue
Risk/uncertainties disclosure required by GAAP?
Yes
Risks and uncertainty required in condensed or summarized interim stmt?
No
Proposed changes in government regulations, accounting principles, possible effects of wars, deficiency in internal controls - a part of risks and uncertainties?
No
Disclosure required items
Nature of operations, use of estimates, certain significant estimates (if probable near term - yes), significant concentration (if severe - more than material), management going concern assessment
When is “subsequent”?
After the date of financial stmt, but before issuance
Do conditions existed at the date of BS require recognition? If not existed, treatment?
Yes. Footnote only
Stock dividend, splits required to adjust financial stmt if occur after BS date but before issuance date?
No
Inventory turn over
COGS / Inbentory
Receivable turn over
Sales / AR
Fixed asset turn over
Sales / Fixed assets
Total asset turn over
Sales / Total assets
Total debt ratio
Total assets - Total equity / Total assets
Debt to equity ratio
Total debt / Total equity
Times interest earned ratio
EBIT / interest
OE ratio
Total OE / Total assets
Profit margin
NI / Sales
Return on assets
NI + (1-tax) x interest / Average assets
Return on equity
NI / Average equity
EPS
(NI - current pref. divi) / weighted average # of shares outstanding
PE ratio
Market price com. stock / EPS
Com. Stock divi payout ratio
Cash divi to com. shareholders / NI
Per share basis
Cash divi per com. shareholders / Earning per com share
Com. Stock yield
Divi per com share / market price per com. share
BV per com. share
Com. Shareholders equity / # of outstanding com. shares
BV per pref. share
Pref. Shareholders equity / # of pref. shareholders stock
How is the cash equivalent reported on stmt of CF?
No effect
Is cash flow per share reported on stmt of CF?
Not allowed
Is pricing of inventory a significant account policy?
Yes
Does indirect method display interest paid, net of amounts capitalized and income tax paid?
Yes
