Accounting & Fin statements

Question 1

What measure of free cash flow takes into account the repayment of debentures?

Answer 1

Equity cash flow - this is remaining left to shareholders.

Question 2

Enterprise FCF?

Answer 2

FCF before considering payments made to any providers of finance to the firm

Question 3

Bank overdraft is..

Answer 3

Liability

Question 4

Prepayments and trade receivables are..

Answer 4

current assets

Question 5

Other names for bonus issues and what this means?

Answer 5

Capitalisation and scrip issues.
Free shares are issued to investors so no additional funds are raised

Question 6

Where is a deferred tax liability found?

Answer 6

Balance sheet

Question 7

What happens when expenditure is capitalised?

Answer 7

Increase in non-current assets rather than a decrease in profit
Cash will decrease

Question 8

Accetable use of share premium account?

Answer 8

To account for IPO costs
To cover NV of new shares issued via a capitlisation/bonus issue

Question 9

What is used to cover payment of dividends if profits aren’t enough and what is this called?

Answer 9

Retained earnings
Uncovered dividend

Question 10

Do stock splits impact the balance sheet?

Answer 10

No

Question 11

Sale of NCA - what would this show in BS?

Answer 11

NCA sale would show a reduction in NCA and corresponding increase in cash of current assets

Question 12

What is work in progress?

Answer 12

Stock = current asset

Question 13

Prepayment?

Answer 13

Expense paid in advance = current asset

Question 14

What is capitalised development costs?

Answer 14

Intangible non current asset

Question 15

What does EPS remove?

Answer 15

Tax
Interest
Preference share dividends
Minority interests

Question 16

Proceeds on issue of bonds and equities - what does this represent?

Answer 16

Net cash flow in relation to financing activities during the accounting period

Question 17

Where does investments in associates appear?

Answer 17

Non current asset

Question 18

Capital redemption reserve?

Answer 18

Created when a company buys back its shares and cancels them

Question 19

Cash flow for equity holders?

Answer 19

Equity cash flow

Question 20

Market value of all debt and equity

Answer 20

Enterprise value

Question 21

Free cash flow to the firm

Answer 21

Enterprise cash flow

Question 22

Warrants and share capital?

Answer 22

Not part of share capital prior to exercise

Question 23

Provisions?

Answer 23

Non current liabilities

Question 24

Stock split and overall value of shares?

Answer 24

Value will be unchanged
Value of equity is unchanged so debt to euqity ratio is also unchanged

Question 25

Price return vs. total return difference?

Answer 25

Price performance disregards income from divs whereas total return looks at both

Question 26

div cover - other equation?

Answer 26

Profit after tax / Net dividend

Question 27

interest coverage equation

Answer 27

EBIT/interest payable

Question 28

What effect does depreciating an asset over a longer period of time have?

Answer 28

Lower depreciation charge, increase EBIT

Question 29

Capital employed - two equations

Answer 29

= total assets - current liabilities
= equity + non current liabilities