Compta 1 - Basics

Question 1

Les 3 principaux etats financiers

Answer 1

Le income Statement, La balance Sheet, Le Cash Flow Statement.
Le incomes statement nous donnes des informations sur un an: Les revenus, les depenses, (operationelles, financieres), les taxes, le profit.
Le balance sheet, nous decrit la compositions des actifs de la compagnies, ainsi que les sources de financement de la compagnies
Le CFS nous decrit les mouvements de tresorerie sur un an. On y fait les ajustement pour les depense hors tresorerie. on y detaille les flux de tresorerie lie aux operations, lies aux financement, et aux investissements.

On a besoin du IS et CFS, parcequ’il y a generalement une grosse difference entre les revenus, depenses, qui sont enregistre au moment ou ils sont merite ou consomme. Et les rentree sorties d’argent, qui sont soumis aux modalites contractuelles entre les partis.

Question 2

Comment rejoint on les 3 etats financiers.

Answer 2

1. Alors dabord le profit se trouve tout en haut du CFS
2. Ensuite on fait les ajustement pour des depense et revenus hors tresorerie (Depreciation, gains)
3. Ensuite entre la BS et CFS on ajuste pour tous les objets qui se rapportent au fonds de roulement (inventaire, creances).
4. Ensuite toujours entre la BS et CFS on fait les ajustements pour les investissements et financements.
5. Apres on a le changement en tresorerie qu’on reporte sur la BS.
6. on fait aussi le lien entre la BS le IS et le CFS pour le changement en equity, qui comprend le net income du IS et le paiement en dividende sur le CFS (financing)

Question 3

Quel est l’etat financier le plus important ?

Answer 3

(ce depends, si on a sur plusieurs annees, si on a qu’une annee) Par elimination je dirais que le BS est moins important ar on ne sait rien de la profitabilite ou productivite de l’entreprise. Ensuite ca depend vraiment de l’observateur. Le IS nous donne une indication de la capacite de la coompagnie a generer des profits, mais pas du cash, et il peut etre truque. Mais le CFS aussi peut donner une fausse impression des reelles operations. Mais generalement quand on faut une valorisation on est interesse par les cash flow donc j’irais avec le CFS.

Question 4

Si tu pouvais ne garder que deux statements?

Answer 4

le IS et la BS, puisque ca suffit pour recreer le CFS, si on admet qu’on a deux BS. (on peut aussi faire dans avec le CFS, mais c’est beaucoup plus dur)

Question 5

En quoi serait different les etats financiers aux US et au UK?

Answer 5

Differents standards de compatabilite. Si je me souviens bien la difference principales concerne la construction du CFS.

Question 6

Comment on sait si un objet doit etre present sur le IS?

Answer 6

1. l’objet correspond a la periode d’observation

2. L’objet affecte les taxes.

Question 7

Comment savoir si un objet doit etre en Actif, Passif ou fonds propre?

Answer 7

1. Un actif est une ressource qui donnera lieu a des revenus, ou peut etre echange pour du cash.
2. Un passif, c’est l’inverse, ca va couter du cash, et on doit le rembourser.
3. Fonds propre, c’est aussi une source d’actif, mais qui ne donnera pas lieu a un remboursement.

Question 8

Comment savoir si un objet doit etre sur le CFS?

Answer 8

1. si un objet est sur le IS, mais ne change pas le cash(il faut ajuster)
2. un objet n’est pas sur le IS, mais change le cash

Question 9

A company begins offering 12-month installment plans to customers so that they can pay for $500 or $1,000 courses over a year instead of all upfront. How will its cash flow change?
In

Answer 9

1. le CFO va baisser
2. Le account receivable va etre debite
3. le revenu ne change pas (excepte le cout d’opportunite)
4. Taxes ne changent pas.
5. au long terme, le revenue peut augmenter.

Question 10

A company decides to prepay its monthly rent – an entire year upfront – because it can save 10% by doing so. Will this prepayment boost the company’s cash flow?

Answer 10

1. Sur le court terme non puisqu’il y a une grosse sortie d’argent.
2. Sur le long terme, les cash flow et revenus devraient augmenter si on admet que le cout d’opportunite de la depense n’est pas superieur aux economies realisee.+ taxes

Question 11

Ou trouver la vraie valeur de depreciation?

Answer 11

sur le CFS. pas sur le IS car:

1. il se pourrait que certains elements de depreciation soient compris de le SG&A, Ca depend des standards utilises.
2. l’issue est la meme, ca protege des taxes et ca ne reduit pas le cash.

Question 12

A company mentions that it collects cash payments from customers for a monthly subscription service a year in advance. Why would a company do this, and what is the cash flow impact?

Answer 12

1. C’est toujours mieux d’avoir le cash en avance puisque ca reduit les fonds de roulement, et ca permet de reinvestir tout de suite, on eviter de payer des interets…
2. Il faut encore que la compagnie ai le pouvoir de faire ca. (confiance) Generalement la compagnie propose un discount de quelque sorte pour encourager a payer rapidement.
3. Ca boost le CFO, augmente les passifs (unearned revenue), et le cash.
4. au fur et a mesure des mois, on reconnait le revenue et fait baisser le passif (cost)

Question 13

why is Accounts Receivable (AR) an Asset, but Deferred Revenue (DR) a Liability?

Answer 13

1. account receivable est un service qui a ete rendu, ou un produit qui a ete vendu, et pour le quel on a pas recu, paiement donc ca va donner a une rentree de cash flow.
2. le DR c’est l’inverse ( on a deja recu, maintenant va falloir faire sa part du boulot, et payer en inventaire)

Question 14

Difference Prepaid Expense et Account payable?

Answer 14

1. PE est un asset, ca a deja ete paye, maintenant le service doit etre rendu, donc quand l’actif sera consommer, ca donnera lieu a une non-cash expense. donc un reajustement a la hausse sur le CFO.
2. le AP, c’est l’inverse.

Question 15

Your CFO wants to start paying employees mostly in stock-based compensation, under the logic that it will reduce the company’s taxes, but not “cost it” anything in cash. Is he correct? And how does Stock-Based Compensation impact the statements?

Answer 15

1. Oui, ca va faire baisser les taxes, puisque on enregistera des depenses. mais on rajoutera sur le CFS.
2. Et ca economisera des depenses en cash qui seront pris en compte par une augmentation des capitaux propres.
3. En revanche il y a un cout economique, puisque ca dilue la valeur des actions, et donc pas sur que les investisseurs aiment.

Question 16

Quelles sont les differentes facons de financer les operations d’une compagnies et les pro/cons?

Answer 16

Deux facons principales: fond propre, ou dette.

1. Fond propre c’est tres bien mais les investisseurs en fonds propre demandent plus de performance puisqu’ils prennent plus risques.
2. LE cout de dette est generalement moins cher, puisqu’elle est repayee en priorite, le probleme c’est que la compagnie doit non seulement payer des interet, et repayer la dette, et ca met une pression sur les etats financiers de la compagnie.

Question 17

Your company sells equipment for $85. The equipment was listed at $100 on your company’s Balance Sheet, so you have to record a Loss of $15 on the Income Statement, which gets reversed as a non-cash expense on the Cash Flow Statement. Why is this Loss considered a non-cash expense?

Answer 17

1. On admet qu’on avait deja l’equipement en stock durant la periode en question.
2. Ce qui se passe, cest que pendant la periode le cash a seulement augmente, donc il faut ajuster.
3. inventaire baisse. le NL de 15 est ajuste par une hausse de 100. donc le cash augment de 85.

Question 18

Your company owns an old factory that’s currently listed at $1,000 on its Balance Sheet. Why would it choose to “write down” this factory’s value, and what is the impact on the financial statements?

Answer 18

1. si la valeur de l’actif a decline, et que l’on estime qu’il n’apportera pas les benefice qu’on avait estime, alors il faut le prendre en compte.
2. peut etre que l’asset est casse, ou obsolete.
3. le cash va augmenter, puisque’ on va economiser des taxes. par contre le NI va baisser, le RE va baisser, et les assets vont baisser en gros.

Question 19

The CFO of your firm recently unveiled plans to purchase short and long-term investments. Why would she want to do this, and how would this activity affect the statements?

Answer 19

1. Une companie a plusieur choix pour ce quil s’agit de faire avec son cash, a priori le CFO a juge plu sinteressant d’investir dans des instruments financers (j’imagine) que de reinvestir dans la compagnie, les instruments, repayer la dette ou les investissseurs.
2. ca va dabord reduire la cash, puis augmenter les revenus d’interets, le profit pre-taxe, et le profit, puis cash.

Question 20

Could a company ever have negative Equity on its Balance Sheet? If no, why not? If yes, what would it mean?

Answer 20

1. Oui si une companie perd de l’argent successivement. L’equation asset = e+l peut toujours tenir si les pertes sont compensees par plus de dettes.
2. c’est generalement mauvais signe, mais ca pourrait aussi etre un symptome normal par example d’une compagnie dans sa periode de developpement, par exemple tech ou biotech, qui doivent souvent investir beaucoup, “bruler” de l’argent, avant de realiser leur premiers profits.

Question 21

Your firm recently acquired another company for $1,000 and created Goodwill of $400 and Other Intangible Assets of $200 on the Balance Sheet. A junior accountant in your department asks you why the company did this – what would you tell him?

Answer 21

1. alors quand on achete une compagnie, une division, tres souvent, l’acquereur paye un premium, au dessus de la valeur tangible de sa cible.
2. donc pour le probleme c’est que les assets seront apres l’acquisition, trop bas par rapport aux liabilities/equity.
3. donc dabord on essaye de combler cette difference en identifiant tous les actifs intangibles (valeur de la marque, valeur du reseau, patents)
4. ensuite pour combler ce qui reste, on cree le goodwil

Question 22

How do Goodwill and Other Intangible Assets change over time?

Answer 22

1. Le goodwill en theorie reste fixe, n’est pas amorti, mais sera eventuellement diminue, si l’on estime qu’il est largement surestime.
2. les actifs intangibles, sont amorti au cours du temps.

Question 23

Walk me through the 3 financial statements when a company’s operating expenses increase by $100.

Answer 23

1. Profit Pre-taxe baisse de 100
2. Taxes baissent de x (40)
3. Profit baisse de 100-x (60)
4. Ensuite sur le CFS, le CFO baisse de 60 simplement
5. sur la balance sheet, le cash baisse de 60, et retained earnings baisse de 60.

Question 24

A company’s Depreciation increases by $10. What happens on the 3 financial statements?

Answer 24

1. Depreciation augment de 10
2. pre taxe profit baisse de 10
3. taxent baissent de 4
4. profit baisse de 6
5. sur le CFS, on rajoute 10 pour la depreciation
6. donc le CFO augment de 4
7. sur la BS, au total le cash augmente de 4, la depreciation baisse de 10, donc -6 sur les assets, et le RE baisse de 6.

Question 25

A company runs into financial distress and needs cash immediately. It sells a factory that’s listed at $100 on its Balance Sheet for $80. What happens on the 3 statements?

Answer 25

sur le IS
1.  une perte de 20 dollars
2. baisse le pretax profit de 20
3. sauve 8 de taxe
4. profit baisse de 12
CFS
1. NI baisse de 12
2. Rajoute la perte (non cash) de 20
3. donc +8 de cash
1. CFI augmente de 80
2. Cash augmente de 80
3. cash total augment de 88
BS
1. assets, cash augmente de 88, PP&E baisse de 100, donc asset tombe de 12.
2. RE baisse de 12.

Question 26

A company decides to CHANGE a key employee’s compensation. It will offer the employee stock options instead of a real salary. The employee’s salary was formerly $100, but she will receive $120 in stock options now. How do the statements change?

Answer 26

IS
1. depenses operationelles augmentent de 20$
2. Pretax profit baisse de 20$
3. Taxes baissent de 8$
4. Profit baisse de 12$
CFS
1. NI baisse de 12$
2. on rajoute 120$ car on a un non -cash expense
3. CFOaugment de 108
BS
1. Cash augmente de 108
2. RE qui baisse de 12
3. l'item en equity (compensation en actions) qui augmente de 120.

Question 27

Your company just acquired another one for $1,000 in cash. The other company’s Shareholders’ Equity was $500, and you identified $100 in Other Intangible Assets with a useful life of 5 years.
What happens on the 3 statements from just AFTER the acquisition closes to the end of the first year following the acquisition? Only factor in Goodwill and Other Intangible Assets.

In the second year, the acquisition goes horribly wrong, and your company realizes the acquired company is worth only about half of what it paid.
So, it decides to write down half the Goodwill created in the deal – how do the 3 statements change, and what is the balance after the write-down?

Answer 27

1.  il y a un gap de 500$, que l'on comble avec 100$ d'actifs intangibles et 400$ de goodwill. l'intangible sera deprecie sur 5ans (on admet)
donc chaque annee,
1. le profit baisse de 12, (20 -8de taxes)
2. le cash va augmenter de 8 (-12+20)
3. asset, cash up 8, PP&E baisse de 20,
4. equity, RE baisse de 12
///
1. faire baisse le profit pre-tax de 200
2. taxes baissent de 80
3. profit baisse de 120
4. on rajoute 200 dans le CFO
5. donc le CFO augment de 80
6. Cash augment de de 80
7. Goodwill baisse de 200
8. RE baisse de 120.

(ADVANCED: le write down sur goodwill pourrait ne pas etre tax-deductible, alors on cree un DTL:DTA)

Question 28

Walk me through what happens on the statements when a customer orders a product for $100 but doesn’t pay for it in cash, and then what happens when the cash is finally collected.

Answer 28

IS
1.revenue augmente 100
2. taxes augmentent 40
3. profit augment de 60
CFS
1. CFO up 60
2. Par contre les receivables, augmentent de 100, 
3. cash genere baisse de 40
BS
1. Cash baisse de 40,
2. recevable up 100,
3. RE up 60
//// au moment de la collecte
CFS
1. AI baisse de 100
2. CFO augmente de 100
3. cash augmente 100

Question 29

A company prepays its rent ($240 per y) a y in advance. Walk me through what happens on the statements when the company prepays the expense, and then what happens when the expense is incurred.

Answer 29

1. rien sur le IS
CFO
1. prepaid expense qui augmente, c'est un actif, donc c'est une baisse de 240 sur le Cash
BS
1. cash baisse 240, PE augment de 240
//// After a year
IS.
1.Depense augmente de 240
2. Pre tax baisse de 240
3. tax baisse de 96
4. Profit baisse de 144
CFS
1. Profit baisse de 144
1. on rajoute 240 de NC-Depense
2. le cash augmente de 96
BS
1. Le cash up 96
2. Le PE baisse de 240
3. le RE (benefice non distribue) baisse de 144.

Question 30

Wal-Mart buys $500 in Inventory for products it will sell next month. Walk me through what happens on the statements when they first buy the Inventory, and then when they sell the products for $600.

Answer 30

IS - RIEN
CFS - inventory up 500, cash down 500
BS - CAsh down 500, Inventory up 500
////
IS - Revenue up 600
cogs up 500
pretax profit up 100
tax up 40
profit up 60
CFS - profit up 60
inventaire baisse de 500 donc + 500
CFO up 560 
BS - Cash up 560
inventaire baisse 500
RE up 60.

Question 31

Amazon.com decides to pay several key vendors on credit and make them wait for the cash. It offers $200 in credit and says it will pay them in cash in a month. What happens on the financial statements when the expense is incurred, and then when it is paid in cash

Answer 31

IS
profit pre taxe descend de 200
taxe baissent de 80
profit baisse de 120
CFS
ajoute 200
donc cash augment de 80
BS
cash augment de 80
RE baissent de 120
et account payable augment de 200
balance
////
CFS
baisse des liabilite 200 
cash descend the 200
BS
AP - 200
CAsh - 200

Question 32

Salesforce.com sells a customer a $100 per month subscription but makes the customer pay all in cash, upfront, for the entire year. What happens on the statements? After one month?

Answer 32

IS rien
CFS
Unearned revenue, passif court terme +1200
Cash augmente 1200
BS
cash +1200
UR +1200
///
IS 
Sales +100
tax 40
profit +60
CFS
on demarre avec 60
UR baisse de 100
on perd 40 de cash
BS
cash - 40
UR -100
Profit +60

Question 33

A company issues $100 in stock to new investors to fund its operations. How do the statements change?

This same company now realizes that it has too much cash, so it wants to issue dividends or repurchase shares. How do they impact the 3 statements differently? Assume $100 in dividends vs. $100 in shares repurchases.

Answer 33

IS - R
* CFS 
FCF + 100
* BS
Cash + 100
Common stock + 100
///
* IS R
* CFS
FCF -100
* BS
cash - 100
RE - 100 or Common stock - 100

Question 34

A company has $1,000 in revenue, $200 in COGS, and $700 in operating expenses, and no other expenses. Walkthrough what happens on the 3 statements if half of the company’s Income Taxes shift from current to deferred.

Answer 34

* IS 
100 Pre tax
40 tax (20 Deffered)
Income 60
* CFS
start 60
add 20 deferred tax
* BS
Cash + 80
RE + 60
Tax liab +20

Question 35

A company buys a factory for $100 using $100 of debt. What happens INITIALLY on the statements?

One year passes. The company pays 10% interest on its debt, and it depreciates $10 on the factory each year. It also repays $20 of the loan each year. What happens on the statements in this first year?

Another year passes. Again, the company pays 10% interest on its debt based on the balance at the start of the year, and it depreciates $10 on the factory, with $20 loan principal repayment.
At the very END of the year, a dragon attacks the factory, and it falls apart. The company has to write down the factory’s entire value and repay the remaining loan balance.
Walk me through what happens on the statements from the BEGINNING of Year 2 to the END.

Answer 35

• IS - R
• CFS
  ICF - 100
  FCF + 100
• PP&E + 100
  DEBT +100
  ///
• IS
  Interest + depreciation -20
  taxe decreases by 8
  Profit decrease by 12
• CFS
  start with -12
  add back 10
  FCF -20
  net cash - 22
• BS
  cash - 22
  PP&E -10
  Debt -20
  RE - 12

///

* IS
Interest 8
depreciation 10
write down 80
tax decrease (40%98) = 39.2
Net income - (59) 58.8
* CFS
-59
add back depreciation 10
add back write down 80
FCF - 80
Cash -49
* BS
cash -49
PP&E -90
DEBT - 80
RE - 59

Question 36

Wal-Mart orders $200 of Inventory but pays for it using debt. What happens on the statements immediately after this transaction?

A year passes, and Wal-Mart sells the $200 of Inventory for $400. However, it also has to hire additional employees for $100 to process the orders.
The company also pays 5% interest on its debt and repays 10% of the principal. What happens on the statements over the course of THIS one year?

Answer 36

• IS - R
• CFS
  increase inventory - 200 CFO
  increase in debt + 200 CFF
• BS
  Inventaire +200
  debt +200
  ////
• IS
  Sales 400
  COGS 200
  op expense 100
  interest 10
  Pretax 90
  Taxes 36
  Profit 54
• CFS
  starts with 54
  inventory down 200
  CFO 254
  CFF - 20
  CF 234
• BS
  Cash up 234
  Inventory down 200
  Asset up 34
  RE up 54
  debt down 20
  L+SE up 34

Question 37

A company issues $100 in Preferred Stock to buy $100 in long-term investments in real estate. The Preferred Stock has a coupon rate of 8%, and the long-term investments yield 10%. What happens on the statements IMMEDIATELY after the initial purchase?

What happens on the statements after a year?

Another year passes, and prices in this real estate market double. The company decides to sell its $100 in long-term investments for $200 at the end of Year 2. It then uses the proceeds to repay its Preferred Stock.

Answer 37

1. • IS - R
     * CFS
     CFI down 100
     CFF up 100
     * BS
     long term investment asset +100
     Preferred stock in SE +100
2. TRICK - preferred stock not deductible
   * IS
   net interest 10
   tax up 4
   profit 6
   * CFS
   profit 6 CFO
   CFF -8
   Cash -2
   *BS
   cash -2
   RE +6
   RE -8 (div)

POINT : after tax yield of inv is only 6%

3. *IS 
interest 10
gain 100
tax 44
profit 66
*CFS
from 66
-100 gain on investment
CFI sale investment200
CFF purchase stock -100
prefered -8
Net cash 58
*BS
Cash up 58
investment down 100
RE up 58
Stock down 100

Question 38

Your company wants to boost its EPS artificially, so it decides to issue debt and use the proceeds to buy back shares.

Initially, the company has 100 shares outstanding at $100 per share, and a Net Income of $2,000.

What happens IMMEDIATELY after your company raises $1,000 in long-term debt and uses it to repurchase $1,000 in stock?

What happens after a year passes if the company pays 5% interest on the debt and repays 10% of the principal? Also, explain the EPS impact

Answer 38

2000/100 = 20 EPS
* IS - R
* CFS
CFF + 1000
CFI - 1000
* BS
Debt +1000
RE -1000
2000/90 = 22,22
///
*IS 
pretax - 50
tax - 20
profit -30
* CFS
-30 CFO
CFF - 100
-130 Cash
* BS
-130 Cash
- 30 RE
-100 Debt
EPS 1970/90 nearly 22

Point: EPS increases, but the company is actually riskier, and generating less income. NEVER TRUST EPS

Question 39

Your company decides to acquire another company for $1,000, using cash. The other company has $400 in Cash, $600 in PP&E, $250 in Accounts Payable, and $750 in Equity.
What happens to your company’s BALANCE SHEET immediately after this acquisition takes place?
Assume that your company has identified $50 in Other Intangible Assets with a useful life of 10 years.

A year passes. What happens on the financial statements, factoring in ONLY the newly created items from the acquisition and the cash used to acquire the company?
Assume a 2% foregone interest rate on cash, and assume that the company loses interest on the FULL $1,000 of cash used in the acquisition, not just the net cash reduction of $600.

At the end of the year, your company decides that it grossly overpaid for the other company, so it decides to write down the Goodwill and PP&E acquired from the other company by 50%.
What happens on the statements, factoring in ONLY these write-downs and nothing else?

Answer 39

1. combine balance sheets
Good will ( difference between acquisition price and SE)
* BS
Cash down 600
PP&E up 600
Asset up 0
Liabilities up 250
we find 50 intangible assets
need 200 more goodwill. 
2.
foregone interest 20
amortization 5
tax - 10
profit -15
*CFS
-15 
\+5 amort
-10 CFO
*BS
Cash -10 
Amortization -5
RE - 15

3.
*IS
loss of 400
tax -160
profit - 240
* CFS
-240 
depense non cash + 400
Cash up 160
* BS
Cash up 160
PPE + GW down 400
RE down 240

Question 40

What is Free Cash Flow, and what does it mean if it’s positive and increasing?

Answer 40

Il y a plusieurs definitions, la plus commune est:
CFO - CAPEX. C’est un proxy, une estimation de ‘argent degage qui peut etre utilise a d’autre fins que le simple maintient ou developement des operations.
avec le FCF la compagnie peut:
etendre ses activites + investissement + de RH + acquisitions
+ payer ses dettes
+ verser des dividendes, racheter des actions.

Question 41

What does FCF mean if it’s negative or decreasing?

Answer 41

Ca ne veut pas dir grand chose en soi: ca depend de la raison. Ca pourrait etre bon signe, si c’est parce que la compagnie s’est lance dans des grands investissements en PP&E. Ca pourrait etre mauvais signe, si c’est parceque les ventes ou les marges on diminuees.

Question 42

What is Working Capital?

Answer 42

La definition courante c’est: Actifs courants (-cash &investments) - Passifs courante (excluant dette). [actifs operationels - passifs operationnels]
Une definition plus utile c’est les besoin en capital d’une compagnie pour operer ses activites au jour le jour.

Question 43

Why do you exclude cash, investments, and debt when calculating the Change in Working Capital on the Cash Flow Statement?

Answer 43

[cash may be included in definion of WC, but in the CFS you do not, because]
l’objectif du CFS c’est trouver le cash, donc on peut pas le trouver, et si on le savait en avance, ca serait du double comptage.
Investments are investing activities, not operational
debt are financing activities, not operational.

Question 44

A company’s Working Capital has increased from $50 to $200. You calculate the Change in Working Capital by taking the new number, $200, and subtracting the old number, $50, and so the change is positive $150.
But on the Cash Flow Statement, the company records the Change in Working Capital as negative $150. Is the company wrong?

Answer 44

No, si le net working capital augment de 150, ca veut dire que la taille des assets operationel a augmente de 150, et on considere qu’elle a du depenser du cash pour le faire.

Question 45

What does the Change in Working Capital mean?

Answer 45

Ca nous donne des indique par exemple si la compagnie a besoin de debourser des resources en avance, ou si elle peut le faire apres.
Par exemple les industries, de grande consomation, ou en manufactures ont generalement des changement de WC positif d’une annee sur l’autre parcequils doivent investir dabord, vendre ensuite.
Une societe de service, par exemple un media, peut d’abord vendre un abonnement, ensuite investir, au dernier moment.

Question 46

You’re comparing two companies. Company A’s Change in Working Capital as a % of the Change in Revenue is 10%, but Company B’s is negative 5%.
Which industries are these companies MOST likely to be in?

Answer 46

(preciser, positif, sur le CFS, ou en general)
A est surement dans la manufacture, fabrique des produit tangibles, peut etre un grande consommation, automobile.
B est peut etre une compagnie de service, logiciel, transportation, logistique.

Question 47

What does it mean if a company’s FCF is growing, but its Change in Working Capital is more and more negative each year?

Answer 47

Ca depend, Ca pourrais simplement dire que les profits augmentent plus rapidement que le WC, ce qui bien possible, et bon signe.
Ca pourrait aussi dire que la depreciation augmente ou devient plus important que les nouveaux investissements capex, ce qui n’est pas forcement bon signe, surtout si on le working capital gagne en profondeur. C’est dur a dire.

Question 48

In its filings, a company states that its EBITDA is a reasonable “proxy” for its Cash Flow from Operations. The company’s EBITDA has been positive and growing at 20% for the past three years.
However, the company recently filed for bankruptcy. How could this have happened?

Answer 48

plein de raisons: le EBITDA ne prend pas en compte:
CAPEX qui peut avoir grossi trop vite
les interets, et obligations de repaiement,
les depenses exceptionelles
le working capital,

Question 49

A company’s ROA has INCREASED from 10% to 15% over the past five years, but its ROE has DECREASED from 13% to 10%. What could have caused this?

Answer 49

TEchnically, Assets should be at least as big as equity, so ROA could not be bigger than ROE.

Question 50

. A company seems to be boosting its ROE artificially by using leverage to fuel its growth. Which metrics or ratios could you look at to confirm or deny your suspicion?

Answer 50

1. mesure d’endettements, DEBT/EBITDA EBITDA/INTEREST. si l’ebitda ne change peu mais que l;endettement lui s’accroit c’est mauvais signe.
2. on peut aussi regarder si le ROA et la base d’asset total change.

Question 51

A company’s Current Ratio is 2x. Why is that NOT necessarily a positive sign

Answer 51

ca depend principalement de la composition des actifs courrant. Si on a des recevables et pas de Cash, ca veut que la compagnie doit payer des creances, mais n’a pa le cash pour le faire, par exemple par ce que ces clients ne vont pas le payer.
2. par contre si on a du cash principalement, ca veut que la compagnie a un certain pouvoir de faire payer ses clients en avance, ce qui est bon signe.

Question 52

Would you expect a retailer or an airline company to have a higher Asset Turnover Ratio?

Answer 52

A retailer, because it usually generates sales in proportions to its inventory, Ie. most of the sales if made up of COGS. many retailer rent their locations, so they tend to have a lower asset base than airlines, who must come up with large upfront investment, PP&E to start generating sales. (although that trend is changing)

Question 53

What does it say about a company if its Days Receivables Outstanding is ~5, but its Days Payable Outstanding is ~60?

Answer 53

Ca veut dire que la compagnie en moyenne prend 5 jours a collecter ses creances, et predn 60 jours a les payer. ce qui est generalement un signe de pouvoir de marche. Ca indique que la compagnie peut financer une bonne partie de ses operations avec l’argent de ses fournisseurs. plus petit WC, plus gros free cash flows.