Financial Reporting & Analysis Flashcards
Amount at which an asset or liability is valued for tax purposes
Tax Base
Amount at which an asset or liability is valued according to accounting principles
Carry Amount
Asset Turnover
(Revenue/Average Assets) Measures the efficiency of a company’s assets in generating revenue or sales
EBITDA Margin
(EBITDA/Revenue) Measures a company’s operating profit, shown as a percentage of its revenue
EBIT Margin
(EBIT/Revenue) Measures the operating earnings over operating sales
EBITDA Multiple
(Enterprise Value/EBITDA) compares a company’s Enterprise Value to its annual EBITDA (which can be either a historical figure or a forecast/estimate). This multiple is used to determine the value of a company and compare it to the value of other, similar businesses.
Return on Common Equity
is a financial ratio that shows how well a company is managing the capital that common shareholders have invested in it.
(Net income - Preferred dividends)/Common Equity
Impairment
an unanticipated decline in the value of an asset, only occurs when carrying value > fair value
Intangible Assets
identifiable, non-monetary assets without physical substance
Operating Activity
Day to day business activity
Investing Activity
acquisition/disposal of non-current assets
Financing activities
obtaining/repaying capital
Assets
Economic resources (current and non-current)
Accounts: Cash, Inventory, Accts Receivables
Contra-Accounts: Depreciation
Equation:
= Liabilities + contributed capital + statement of retained earnings (aka. ending retained earnings)
Liabilities
creditor’s claim on resources (current and non-current)
Accounts: Accts Payable, Accrued Expenses
Equity
residual claim on resources
=Contributed Capital + Retained Earnings
Accounts: Paid-in-capital, retained earnings
Revenues
inflow of economic resources
Accounts: Sales
Contra-Accounts: Returns & Allowances
Expenses
outflow of economic resources
Basic Accounting Equation
Assets = Liability + Equity
Residual Claim
Owners equity, shareholder equity, net assets, net worth, net book value
Ending Retained Earnings equation
= beginning retained earnings + net income - dividends
= beg. retained earnings + Revenue - Expenses - Dividends
Double Entry Accounting
every transaction affects at least 2 accounts such that debits = credits
Unearned Revenue
(liability) get paid before delivery of goods/service
Accrued Revenue
(asset) not yet billed
Prepaid Expense
(asset) paid for but not yet used
Accrued Expense
(liability) incurred but not yet billed
Historical Cost
All transactions are recorded at
Adjustments
reflect items not reported
reconcile IFRS/GAAP
reconcile accounting policies
Primary purpose of financial reports
provide information and data about a company
to see financial position
to see performance (profitability & cash flows)
Statement of financial position
balance sheet (point in time)
Income statement
(over a period of time)
-single statement
Revenue + other income (typically gains)
- (expenses + losses)
= Net income
Statement of comprehensive income
all items that change owners equity (except transactions with owners)
Statement of changes in equity
reconciles beginning balances with ending balances
statement of cash flows
operating
investing
financing
Notes to the financial statements
methods, estimates, assumptions
MD & A
not audited, additional information
Audit
annual statement only
opinion on
- fair presentation
- internal controls
Unqualified opinion
best or highest opinion
Qualified opinion
everything is fine except for a little thing
Adverse opinion
do not like what we see
Disclaimer of Opinion
cannot make opinion (not bad but nothing there)
Financial Statement Analysis Framework
- purpose
- collect data
- process data
- analyze/ interpret
- communicate conclusions
- follow up
Diluted EPS
Net Income - Preferred Share Dividend (PSD)
PSD = (P.S+ # of convertible shares) / (Weighted average common shares + new shares after preferred x conversion rate
intangible assets
non current asset which is identifiable, non-monetary assets without physical substance (copyright, patent, licenses, trademark)
IFRS: cost model (cost - amortization - impairment (definite life only) or revaluation
GAAP: cost model (cost - amortization - impairment (definite life only)
(indefinite life - tested annually for life or impairment)
internal developed intangible assets typically not recognized on balance sheet where costs during research are expensed and costs during development are capitalized
if acquired capitalize on Balance sheet at cost
Capitlized
is to record a cost or expense on the balance sheet for the purposes of delaying full recognition of the expense.
Goodwill
excess over fair value of acquiring another company
purchase price is allocated to FV of all A and L
EBITDAR
Earnings before interest taxes depreciation amortization rental payments
interest paid on a lease
IFRS: operating, investing, financing
GAAP: operating
Current Ratio
current assets/ current liabilities
current assets: cash, marketable securities (<1yr), accts receivables, inventory, prepaid expenses
current liabilities: accts payable, current portion of LTD, line of credit
Current Ratio
current assets/ current liabilities
current assets: cash, marketable securities (<1yr), accts receivables, inventory, prepaid expenses
current liabilities: accts payable, current portion of LTD, line of credit, accrued liabilites
Interest or Dividends Recieved
IFRS: Operating or investing
GAAP: Operating
Current Ratio
current assets/ current liabilities
current assets: cash, marketable securities (<1yr), accts receivables, inventory, prepaid expenses
current liabilities: accts payable, current portion of LTD, line of credit, accrued liabilities
Interest or Dividends Recieved
IFRS: Operating or investing
GAAP: Operating
COGS
Beg Inventory + purchases - ending inventory
Purchases
Ending Inventory + COGS - Beginning Inventory
Purchases
Ending Inventory + COGS - Beginning Inventory
Beginning Inventory
Ending Inventory + COGS - Purchases
Ending Inventory
Beginning Inventory + Purchases - COGS
Income Statement
presents financial results over a period of time
Multi step income statement
Rev - COGS = gross profit Gross profit - operating expense = EBIT operating profit (or EBIT) - interest = EBT EBT - taxes = net income
