Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFA Level I > Financial Reporting & Analysis (20%) > Flashcards

Financial Reporting & Analysis (20%) Flashcards

You may prefer our related Brainscape-certified flashcards:
CFA flashcards
1
Q

Characteristics of a Coherent

Financial Reporting Framework

A
  • Transparency
  • Comprehensiveness
  • Consistency
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Fundamental Characteristics of Financial Statements

A

U.S. GAAP

  • Relevence
  • Faithful Representation

​IFRS

  • Fair Presentation
  • Going Concern
  • Accrual Basis
  • Consistency & Materiality
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Qualitative Characteristics of

Financial Statements in IFRS

A
  • C omparability
  • U nderstandability
  • R elevance
  • R eliability

(CURRy)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Enhancing Characteristics of Financial Statements

A
  • V erifyability
  • C omparability
  • U nderstandability
  • T imeliness
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Elements of

Financial Statements

A

Balance Sheet

  • Assets
  • Liabilities
  • Owners Equity

Income Statement

  • Revenues
  • Expenses
  • Gains & Losses
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Factors that Contribute to Reliability in IFRS

A
  • Substance over Form
  • Faithful Representation
  • Nutrality
  • Prudence
  • Completeness

(SUFFR’N-PC)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Activity Ratios

A
  • Receivables Turnover, DSO
  • Inventory Turnover, DOH
  • Payables Turnover, DOP
  • Total Asset Turnover
  • Fixed Asset Turnover
  • Working Capital Turnover
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Receivables Turnover

A

Revenue

————————————

Average Receivables

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Days Sales Outstanding

DSO

A

365

————————————

Receivables Turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Inventory Turnover

A

COGS

———————————

Average Inventory

  • number of times invetory is sold or used in yr.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Days of Inventory on Hand

DOH

A

365

———————————

Inventory Turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Payables Turnover

A

Purchases

——————————

Average Payables

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Number of days of Payables

DOP

A

365

——————————

Payables Turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Total Asset Turnover

A

Revenue

————————————

Average Total Assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Fixed Asset Turnover

A

Revenue

——————————————

Average Net Fixed Assets

  • ppe net of depreciation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Working Capital Turnover

A

Revenue

—————————————

Average Working Capital

working cap - ca-cl

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Liquidity Ratios

A
  • Current Ratio
  • Quick Ratio
  • Cash Ratio
  • Defensive Interval
  • Cash Conversion Cycle
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Current Ratio

A

Current Assets

——————————

Current Liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Quick Ratio

(Acid Test)

A

Cash + Marketable Securities + Receivables

————————————————————————

Current Liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Cash Ratio

A

Cash + Marketable Securities

————————————————

Current Liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Defensive Interval

A

Cash + Marketable Securities + Receivables

———————————————————————

Average Daily Expenditures

  • how many days can a company operate without having to access noncurrent assets.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Cash Conversion Cycle

A

DSO + DOH - DOP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Solvency Ratios

A
  • Debt-to-Equity
  • Debt-to-Capital
  • Debt-to-Assets
  • Financial Leverage
  • Interest Coverage
  • Fixed Charge Coverage
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Debt-to-Equity Ratio

A

Total Debt

———————

Total Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Debt-to-Capital Ratio

A

Total Debt

—————————————

Total Debt + Total Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Debt-to-Assets Ratio

(Debt Ratio)

A

Total Debt

———————

Total Assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Financial Leverage Ratio

A

Average Total Assets

————————————

Average Total Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Interest Coverage Ratio

A

EBIT

——————————

Interest Payments

A ratio used to determine how easily a company can pay interest on outstanding debt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Fixed Charge Coverage Ratio

A

EBIT + Lease Payments

————————————————————

Interest Payments + Lease Payments

  • A ratio that indicates a firm’s ability to satisfy fixed financing expenses, such as interest and leases.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Profitability Ratios

A
  • Net Profit Margin
  • Gross Profit Margin
  • Operating Profit Margin
  • Pretax Margin
  • ROA
  • Operating Return on Assets
  • Return on Total Capital
  • Return on Equity
  • Return on Common Equity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Net Profit Margin

A

Net Income

———————

Revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Gross Profit Margin

A

Gross Profit

———————

Revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Operating Profit Margin

A

EBIT

——————

Revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Pretax Margin

A

EBT

——————

Revenue

35
Q

Return on Assets

ROA

A

Net Income

————————————

Average Total Assets

or

Net Income + Interest Expense (1 - t)

———————————————————

Average Total Assets

36
Q

Operating Return on Assets

A

EBIT

————————————

Average Total Assets

37
Q

Return on Total Capital

ROTC

A

EBIT

————————————

Average Total Capital

38
Q

Return on Common Equity

A

Net Income - Preferred Dividend

——————————————————

Average Common Equity

39
Q

Performance Ratios

A
  • Cash Flow-to-Revenue
  • Cash Return-on-Assets
  • Cash Return-on-Equity
  • Cash-to-income
  • Cash Flow Per Share
40
Q

Cash Flow-to-Revenue Ratio

A

CFO

————————

Net Revenue

41
Q

Cash Return-on-Assets Ratio

A

CFO

————————————

Average Total Assets

42
Q

Cash Return-on-Equity Ratio

A

CFO

————————————

Average Total Equity

43
Q

Cash-to-Income Ratio

A

CFO

——————————

Operating Income

44
Q

Cash Flow Per Share

A

CFO - Preferred Dividends

———————————————

WASO

45
Q

Coverage Ratios

A
  • Debt Coverage Ratio
  • Interest Coverage Ratio
  • Reinvestment Ratio
  • Debt Payment Ratio
  • Dividend Payment Ratio
  • Investing and Financing Ratio
46
Q

Debt Coverage Ratio

A

CFO

——————

Total Debt

47
Q

Interest Coverage Ratio

A

CFO + Interest Paid + Taxes Paid

——————————————————

Interest Paid

48
Q

Reinvestment Ratio

A

CFO

—————————————————

Cash Paid for Long Term Assets

49
Q

Debt Payment Ratio

A

CFO

——————————————————

Cash Long-Term Debt Repayment

50
Q

Dividend Payment Ratio

A

CFO

————————

Dividends Paid

51
Q

Investing and Financing Ratio

A

CFO

————————————————————————————

Cash Outflows from Investing and Financing Activities

52
Q

Return on Equity

ROE

A

Net Income

————————————

Average Total Equity

53
Q

Original DuPont Equation

A

ROE = ROA * Financial Leverage

or

ROE = Profit Margin * Asset Turnover * Leverage Ratio

       Net income           Revenue          Assets

——————— X —————— X —————

 Revenue              Assets             Equity

(NRAE)

54
Q

Extended DuPont Equation

A

ROE = Tax Burden * Interest Burden * EBIT Margin *

Asset Turnover * Financial Leverage

NI EBT EBIT Revenue Assets

——— X ——— X ————— X ————— X —————

EBT EBIT Revenue Assets Equity

(NeERAE)

55
Q

Free Cash Flow to the Firm

FCFF

from CFO

A

CFO

  • Fixed Captial Investment

+ Interest Expense(1 - t)

FCFF = N/I-NCC+int exp(1-t) -FCinv - WCinv

56
Q

Free Cash Flow to the Firm

FCFF

from Net Income

A

Net Income

  • Fixed Capital Investment

+ Interest Expense(1 - t)

+ Non-Cash Charges to Income

  • Working Capital Investment
57
Q

Free Cash Flow to Equity

FCFE

from CFO

A

CFO

  • Fixed Capital Investment

+ Net Borrowing

58
Q

Basic EPS

A

Net Income - Preferred Dividends

——————————————————

WASO

59
Q

Diluted EPS

A

NI - Pref Div + Conv Debt Int(1 - t) + Conv Pref Div

————————————————————————————

WASO + Debt Shares + Pref Shares + Option Shares

60
Q

Ending Inventory

A

Beginning Inventory + Purchases - COGS

61
Q

FIFO from LIFO

A

FIFO Inv = LIFO Inv + LIFO Reserve

62
Q

FIFO COGS

from

LIFO COGS

A

FIFO COGS = LIFO COGS - Change in LIFO Reserve

63
Q

Deferred Taxes

A

Income Tax Expense = Tax Payable + ►DTL - ►DTA

64
Q

Working Capital

A

Current Assets - Current Liabilities

65
Q

CFO

Indirect Method

A

Net Income

  • Cash Gains from Investing & Financing

+ Non-Cash Charges to Income (Dep,Amort)

  • Non-Cash Components to Revenue
  • Increases in Asset Accounts

+ Increases in Liability Accounts

66
Q
  1. Analyst gathered following:
  • Net sales $4000
  • dividends declared $170
  • COGS $2000
  • Inventory increase $100
  • A/P increased by $300
  • Cash expense $500
  • Long term debt repayment - $250
  • cash tax payment $200
  • purchase of new equipment $300
A

4000 - Since no change in A/R

(2000)

(100) - use

300 - source of cash

(500) -

(200)

=1500.

  • GAAP - dividends rcvd are CFO inflow, paid are financing outflow.
  • All debt =CFF. equipment and land = CFI
67
Q

The following data pertains to comp common size statements.

CA - 40%, Total debt - 40%, N/I - 16% , Total assets - $2,000, Sales - $1500, Total asset turnover ratio - .75

Company’s after-tax return on common equity is closest to?

a. 15% b. 20%. c. 25%

A

return on common equity - N/I / avg equity

= .16(1500)/ (1-.4)(2000) = 20%

B. 20%.

68
Q

In accounting the prior service costs refers to?

A

PV of increase in future pension benefit from change in terms of benefit plan.

69
Q

Average Age of Assets

A

Accumulated Depreciation

————————————————

Annual Depreciation Expense

70
Q

Fraud Triangle

A
  • R ationalizations
  • I ncentives
  • O pportunities

(Blame it on Rio)

71
Q

Beta

ß

A

Covariance [Asset,Market]

——————————————

Market Variance

72
Q

What are extraordinary items?

A

unusual and infrequent items that are reported seperately, net of tax, a**fter net income from continuing operations. **

73
Q

Impairment Loss Under IFRS

A

Carrying Value - Recoverable Amount

Recoverable Amount = The greater of the value in use or the fair value less costs to sell.

74
Q

Price to Earnings Ratio

P/E

A

Dividend Payout Ratio

————————————

Required ROE - g

75
Q

Total Comprehensive income?

Other comprehensive income?

A
  • net income + other comprehensive income
  • Loss and gains on available for sale securities and translation adjustments on foreign subsidies.
76
Q

Net realizable value?

A
  • IFRS for inventory
  • Net realizable value = sales price - selling and completion costs
  • if Net realizable value is less than balance sheet value of inventory, then you use it. And write down asset. You can also write up asset.
    • done through a valuation allowance acc
      *
77
Q

Income tax expense =?

Valuation allowance?

A
  • income tax expense = taxes payable + ►DTL - ►DTA
  • reduction of deferred tax assets based on likelihood the assets will not be realized.
78
Q

purchases

A

purchases = ending inventory - beginning inventory + COGS

79
Q

tax burden ratio

A

Net income/EBT

EBT is pretax income

80
Q

Interest burden ratio

A

EBT/EBIT

EBT = pretax income

higher = better

81
Q

operating cash flow

A

operating cash flow/N/I

Less than 1, means you gots problems.

82
Q

IOSCO?

A

The IOSCO is not a regulator of financial markets. To ensure consistent application of international financial standards, it is important to have uniform regulation and enforcement across national boundaries. IOSCO assists in attaining this goal of uniform regulation as well as cross-border cooperation in combating violations of securities and derivatives laws.

83
Q

net profit margin

A

ROA/asset turnover

84
Q

Financial leverage?

A

ROE/ROA

CFA Level I (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions