Financial Accounting Flashcards
What are the contents of the financial report?
Explanations, business description, financial statements, auditors report, corporate structure, market & industry overview, comprehensive IS
How many terms is an auditor allowed to stay with the same company?
- Maximum of 9 years
Why is the CEOs salary included in the annual report?
For transparency, ESG targets, stock options. It can affect the likelihood of the report being manipulated
Who defines the content of the annual report?
Stock exchange, the company, local legislation
What are the most important KPIs?
- EBIT % of sales
- EBIDTA % EBITDA margin % over sales
- EBIT % over sales
- Revenues
- ROI % (operating income/fixed assets)
- ROS (operating income/sales x sales/fixed assets
What are the four main measurements of a company?
- Profitability
- Liquidity
- Solidity
- Growth
Why is EBIDTA an important measure?
It shows the cash flow, used for valuation, cash flow from core operations
Why is DA added back to the cash flow statement?
Because it is not a cash expense
Which is the core result of the company?
The EBIT % over sales
What can justify a high leverage?
Growth
How do you calculate ROE?
Net income/equity
What is working capital?
Current assets - current liabilities
What does an increase in working capital tell us? Mention the positive and negative
Increase in assets such as cash, accounts receivable, or inventory, or decrease in liabilities such as accounts payable & short term debt. Positive: Increased liquidity, negative: inefficiency (too much inventory)
Who requires more working capital, a manufacturer or a software company?
Manufacturer
Who has more working capital, a stable or growing company?
Growing
