BAR - 1A1: Financial Statement Analysis

Question 1

Book Value Per Share

Answer 1

Is the value of total net assets available to common shareholders divided by the common shares outstanding.

Question 2

Common-base-year financial statement

Answer 2

express each item of the statements as a percentage of a base year (100%).

Does the company use more or less debt? Is the company more or less liquid.

Question 3

Operating Leverage

Answer 3

This is in relation to fixed costs and variable costs, but mainly on fixed costs. Earnings change as a percentage, sales to EBIT.

Question 4

Gross Profit

Answer 4

Sales minus COGS

Sales - COGS

Question 5

Gross Profit Margin

Answer 5

Gross Profit / Sales

Question 6

Operating Profit Margin

Answer 6

Operating Income / Sales

Question 7

ROE (Return on Equity)

Answer 7

Profit Margin x Asset Turnover x Leverage

Question 8

AR Receivable Turnover

Answer 8

Net Credit Sales / Average Accounts Receivable

Turnover in Days= 365 / Times turnover in a year

Question 9

Finanacial Leverage

Answer 9

Refers to the amount of debt in a firms capital structure

Question 10

Operating Cycle

Answer 10

The amount of time from investment in inventory to when cash is received from the sale of the inventory. Cash collected. If sale is in AR it has not completed the operating cycle.

Question 11

FIFO Costing system. Transferred-In Costs

Answer 11

Are the costs incurred in preceding departments

Question 12

Hedge Swap

Answer 12

entity enters into a swap agreement without an underlying asset or obligation, and is still able to eliminate or reduce the interest rate liability

Question 13

Traditional Costing Method

Answer 13

Total Production Cost=
Direct Material +
Direct Labor +
Overhead Costs

Question 14

Calculate Net Present Value (NPV)

Answer 14

It’s the difference between present value of future cash inflows and the investments initial costs.

Take the multiplier times the future cash inflow, then subtract it from the initial investment.