accounting Flashcards
what is the function of financial info
- informative (entrepreneur, investory, external creditors, supplier, customer)
- tax basis
- profit distribution
obligations to book keeping
<700 000 single entry
> 700.000 double entry+ accrual accounting (financial statement)
group also consolidated statement
principles of book keeping
causation: expenses when seen, revenues when realized
congruency: tax tules follow commercial accounting rules
realization: forbidden to book revenues before realized, losses in advance
IFRS:
no tax rules
matching: book matching expenses to revenues
accounting activties:
- financial: loans, interest expense, issuing shares and bonds, treasury shares, paid in capitan, dividends
- investing: income from financing acticties (dividends, interest income, securities), long-term assets
- operating: sales, expenses, paying taxes, purchases
closing accounts
- putting expenses and revenues on profit and loss account 9890 and afterwards put profit and loss account on balance sheet account 9850
- put assets, equity and liability on 9850
balance sheet content debit side
assets: longterm: -intangible -tangible -financial fixed assets current assets: -inventory -receivables -asset securities -cash prepaid expenses deferred taxes
IFRS: current in order in which turnt jnto cash, then prepaid part then longterm
balance sheet credit side
equity: -paid in capital -revenue and capital reserves -net income liabilties -allowances -liabitlies like trade payables or loan or or prepayments -unearned revenue
IFRS: first liability in order in which they decrease cash then equity
income statement content
operating income: -sales -changes in inventory -own work capitalized -other operating -disposal of longterm assets -released allowances operating expense: -cogs -personell -depriciation operating result financial income or expenses EBIT tax after tax retained earnings release of reserves allocation to revenue reserves net income/loss
account numbers
assets: #x1xx-#2999
-longterm assets #100-#999
-current assets #1000-#2999
liabilties #3xxx
reveneues #4xxx
expenses #5xxx-#8xxx
equity #9xxx
cash flow statment (use)
use: determine futur cashflow how cash is generated use and origin of cash ablitiy to pay interest dividends and debt
cash flow (parts)
-cash flow:
equity old-new
operating cash flow: cash effect of revenues and expenses
-investing cash flow:
income from financial investments, purchase of long term and fixed financial investments
-financing cash flow:
interest expense, dividends, issuing of shares and bonds, repayment of capital and issuing of capital
direct method
liquid assets-outgoing payments+incoming payments
indirect method (general)
calculation start with income before tax
kick out everything that is not operating cash flow or no cash effect
-operating cash flow
-investing cash flow
-financing cash flow
working capital
inventory receivable prepaid expenses liabilities allowances unearned revenues
operating part cash flow stat
\+depreciation -disposal of longterm assets -income of financial assets -prepaid expenses \+unearned -receavable \+payables \+provision -tax payment -inventory
investing part cash flow
\+disposal of longterm \+disposal financial investment -purchase of longterm assets -purchase of financial assets \+income financial investment \+interest income
financing part cash flow
-Dividend
-interest expense
+issuing of shares and bonds
-repayment of loan
+issuing share captial
-repaying share capital
practitioner method
net income- non-cash revenues+non-cash expenses
—> everything was bought with cash
free cash flow
cash free for financing anf investing activities or cash free after paying for planned investments and after dividends
what does a consolidation do, what do you do?
eliminate all internal processes
increase info for investors
consolidation rules and regulation (voluntarily)
can prepare jnder austrian code or IFRS voluntarily: -future stock exchange listing -foreign investors -compare with competitors
obligation for consolidation
-when listed on stock exchange
-groups
2 affiliated companies with uniform control or dominant rights
or when dominant influence
or when right to influence voting behaviour
or when shareholder and right du appoint majority of members of supervisiory
or majority of votings
-associated companies with 20% or more control
-subsidiary no matter what form
exemption from consolidation
essential: when influence less then 5%
size: 24 mio assets or 48 mio sales and 250 employees, net method: 20,40,250
inclusion: included in othrr companies stat,
importance: info only witt unproportionat effort or price, sub only got reselling
form of consolidated financial statement
entity principle:
as if one company
valuation principle:
with similar valuation concerning useful life or inventory principles
same date:
if prepared 3 months before or after have to consider intermin financial statement for this period
steps of consolidated financial statement
- hand in info to parent
- uniformity of strcuture, date, currency, consideration of positions
- elimination process
- minority interest
step 3 of consolidated finance stat
capital: investment vs assets of sub
debt: debt vs receivable
income: revenues vs expenses
interim profit: unrealised profit if inventory or assets purchased from other company
distribution: dividends
capital consolidation
investment of parent into sub has to be cleared
equity of sub assessed with fair present value
3 types of captial consolidation outcomes
- fair value - purchase price= goodwill
- proportionat realization of silent reserves
- negative difference
minority interest in captial consolidation
everything proportionate to ownership
fair value * minority = minority interedt
multistage group and capital consolidation
when parent company is sub for another parent company problems: -minority interest of one sub -investment -differences from captial consolidation
performed one and repeated in the same way
still how to treat differences:
-depreciation of goodwill estimate or 10 years
-negative difference released by changing net income as soon as neg development is realised
debt consolidation
can not own itself money or have receivable from itself
- prepayments, longterm loans, allowances
- differences: timing, positioning
- minority not considered
revenues and expenses consolidation
no intercompany revenues or expenses
- rent, interest, matrrial, personnell
- if goods delivered already sold no interim result has to be eliminated cause cogs already shown so only sales and material expense eliminated
consolidation of interim results
if inventory not sold, just internal transfer, so sales need to be elominated
consolidated cash flow
only for groups
add all results of individual cash flows and eliminate all changes due to consolidation
—> done for changes of intercompany effects (debt consolidation), minority interest and dividend payments
use of financial statement analysis
-decision making compare with others investment decision performance measure -creditors able to meet payments liquid enough to pay back loans -stockholders stock prices profitability dividends
deficits of financial statement analysis
towards past
not up to date
figures to low because principle of causion
figures incomplete cause not qualitative figures
do not show accounting policies
use of accounting policies
increase result -being sold -getting bonus -new credit decrease result -save taxes -management buyout -share repurchase smoothing results reaching target results
balance sheet related adjustments (financial statement analysis)
short term: -sell or purchase assets -change timing if expense -pay back liabilities before year ends long term: -restructure organisation (joint ventures, sell parts of company) -change longterm agreements
wrong book keeping decisions
over or underestimation:
-forgot to report income increasing adjustments
-long term assets booked to short or long
-forgott expenses
wrong choice:
-over or underestimation of inventory
-underestimation of liabilities oder over of receivables
-new long term asset or just machine maintenance
horizontal financial statement analysis
earlier period always 100%
compare multiple years with earliest the base or always two with younger one the base
percentage change
vertical analysis
balance sheet total the base in income statement sales
always percentage of one in comparison to base
used for:
-evaluation ability to pay back liabilities
-evaluation of profitability
-evaluation of stock
-evaluation of ability to sell merchandise and collect receivables
financial status ratios
- current and longterm asset intensitiy
- equity ratio and debt ratio
- equity to debt ratio
- depreciation rate
- investment coverage ratio
- degree of depreciation
liquidity ratios
- equity to fixed asset ratio
- current ratio
- quick ratio
intensity of long and current assets
long term or current assets divided by total assets
-if high longterm asset not flexibile can not sell of long term quickly
equity ratio and debt ratio
equity ratio= equity/equity and liab.
—> if high longterm intensitiy need high equity ratio so that long term financed with equity
—> negative if equity eaten up by loss and loan is bigger than assets
debt to equity ratio
total liab/total equity
proportion of equity that is financing assets if over 100% assets rather financed witb debt
depreciation rate
depreciation/average acquisition costs
- depreciation policy
- rather long useful life or short do decease income quicker
investment coverage ratio
-does company invest devaluation of assets to keep them at a standard
investment-book value of disposal/depreciation
degree of asset depreciation
accumulated depreciation/acquisition costs
equity to fixed assets
equity/long term assets
—> are longterm assets financed by equity if under 100% add long term debt to see if it ar least is financed by long term debt
equity+long term liab/long term assets
current ratio
current assets/current liabl
if it is under 100% means we have more current liab than current assets which means that we financed longterm assets with current liabilties also that we can not pay back current liab with current assets
quick ratio
deduct invenotry from assets in current ratio because company should not have to sell inventory to pay back current assets
profitability ratios
gross profit margin break even sales return on sales return on assets asset turnover return on equity
gross profit margin
gross profit(sales-cost of good sold)/sales
break even sales
sum of all other expenses and revenues/gross profit margin
return on sales
net income/sales
how much of sales left as net income
shows how well company manages expenses
return on assets
net income+interest expense/average assets
how well company generates net income with assets
deduct interest expense to leave out financing aspect
asset turnover
net sales/average assets
how much of sales genersted by assets
return on equity
net income attributable to commonh stockholder/equity
how much return on each euro invested
if 100%= ROA
leverage effect
increase ROE by substituting equity by liabiltiey which only works if the interest of the loan is below the ROA
evaluating stock investments ratios
earnings per share
dividend pyout
price earning ratio
dividend yield on common stock
earnings per share
net income attributable to common shareholder/shares outstanding
dividend payout
anual divided/eps
measures percentage of earning paid to shareholders
price earnings ratio
market price of share/eps
how long investor needs to earn back invested money
dividend yield to common stock
annual dividend/ market price per share
percentage of stocks value that is return as dividend
other ratios
inventory turnover&average days in inventory
acc payable turnover&average collection period in days
accounts receivable turnover&average collection period in days
inventory turnover and average days
material expense/inventory
wie oft wird inventory pro jahr verkauft
365/ inventory turnover = wie lang zeug im invenotry is bevor es verkauft wird
acc payables turnover
cogs/average acc payables
wie oft company ihre payables abbezahlt
acc receivables turnover
credit sales/average receivables
wie oft comsony ihre receivables pro jahr verkauft
