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CFA > Financial Reporting & Analysis > Flashcards

Financial Reporting & Analysis Flashcards

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CFA flashcards
1
Q

Cash conversion cycle (a.k.a. net operating cycle)

A

(Inventory turnover + Receivable TO - Payables TO)*365

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2
Q

Inventory turnover

A

COGS/Average inventory

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3
Q

Receivables turnover

A

Sales/Average AR

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4
Q

Payables turnover

A

Purchases/Average AP COGS can be used instead of Purchases

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5
Q

Cash Flow statement - interest paid

IFRS vs US GAAP

A

IFRS - financing or operating US GAAP - operating only

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6
Q

FCFF

A

Net income + Non-cash +interest expense(1-t) - capex - working capital exp.

Non-cash include gain on sale (если Psale > BV, то разницу добавляем обратно в CF)

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7
Q

Pension Expense

A

Defined contribution plan + Defined benefit plan

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8
Q

Debt-to-capital

A

Total debt/ (total debt + total Shareholders equity)

*Total debt include only interest bearing debt

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9
Q

Intangibles must be valued at historical cost (US or IFRS?)

A

US GAAP

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10
Q

Current Assets/Liabilities before long-term (US or IFRS?)

A

US GAAP

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11
Q

IFRS: financial information fundamentals

A
  • Relevance
  • Faithful representation
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12
Q

Deferred tax balance

A

Temporary difference balance * tax

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13
Q

Compound annual growth rate

A
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14
Q

ROE

A
  • ROA * Financial leverage
  • Net profit margin * asset turnover * financial leverage
  • ROE = operating profit margin * asset turnover - interest expense rate * equity multiplier * tax retention
  • net profit margin * asset turnover * equity multiplier
  • ROE = Tax burden × Interest burden × Earnings before interest and taxes margin × Asset turnover × Leverage.
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15
Q

Cash to income

A

CFO/Operating income

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16
Q

Fixed charge coverage ratio

A

(NI + Income tax exp + Interest + Lease)/(Interest + Lease)

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17
Q

Financial leverage ratio

A

Avg. Total Assets/ Avg. Total Equity

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18
Q

Quick ratio

A
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19
Q

The present value of the operating leases should be added to

A

both the total debt and the total assets.

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20
Q

OFFTOPIC:

BGN mode value = ?

A

END mode value * (1+i)

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21
Q

Net realizable value (NRV)

A

estimated selling price less the estimated costs necessary to get the inventory ready for sale and make the sale

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22
Q

IFRS:

condition that must be met for revenue recognition to occur

A
  • costs incurred can be reliably measured
  • the seller knows what it expects to collect and is reasonably certain of collection
  • the significant risks and rewards of ownership have been transferred, which is normally (but not always) when the goods have been delivered.
23
Q

Cash flow from operations calculation:

A
24
Q

Sarbanes–Oxley Act

A

The adequacy of internal control over financial reporting

25
Q

Diluted EPS calculation

A

(net income - preferred dividends) + convertible preferred dividend + (convertible debt interest * (1-t))

Divided by

weighted average shares + shares from conversion of convertible preferred shares + shares from conversion of convertible debt + shares issuable from stock options.

26
Q

A company issued a $50,000 seven-year bond for $47,565. The bonds pay 9% per annum, and the yield to maturity at issue was 10%. The company uses the effective interest rate method to amortize any discounts or premiums on bonds. After the first year, the yield to maturity on bonds equivalent in risk and maturity to these bonds is 9%. The amount of the bond discount amortization recorded in the first year is closest to:

A
27
Q

sustainable growth rate ?

A
  • g=RR*ROE
  • RR= 1 - dividend payout ratio
28
Q

Financial ratios alone are not sufficient to determine

A

creditworthiness of a company

29
Q

Bonds payable issued by a company are financial liabilities that are usually measured at

A

amortized cost.

30
Q

(under IFRS ) Dividends received can be classified as

A

either an operating or investing activity but not as financing

31
Q

Long-lived assets that will be disposed of other than by sale, such as in a spin-off, an exchange for other assets, or abandonment, are classified as

A

held for use until disposal and continue to be depreciated until that time.

32
Q

Under IFRS the statement of comprehensive income should most appropriately begin with:

A

the profit or loss from the income statement.

33
Q

Debt payment ratio

A

Cash flow from operations/Cash paid for long-term debt repayment

34
Q

Treasury stock is

A

non-voting and does not receive dividends.

35
Q

Under IFRS, the carrying amount is compared with

A

Recoverable amount = higher of:

  • fair value minus costs to sell
  • present value of expected future cash flows
36
Q

The cash from operations is lower if the lease is classified as

A

operating lease

37
Q

Tax burden ratio

A

Net income/Earnings before tax

38
Q

Cash flow debt coverage ratio

A

CFO/Total debt

39
Q

A stock split is treated as

A
  • if it occurred at the beginning of the year
  • считаем среднее количество, будто ничего не было и вконце умножаем на 2
40
Q

Basic EPS ? Diluted EPS

A
  • Basic > Diluted
  • Diluted EPS must be less than basic EPS.
    • Otherwise Diluted EPS=Basic EPS
41
Q

Software development is allowed by which standard?

A

US GAAP

42
Q

Capitalization of development costs - ?

A

IFRS allows development costs to be capitalized if certain criteria are met;

43
Q

Adjust LIFO method to compare with FIFO method

A

Current inventory + LIFO Reserve

44
Q

Interest expense =

A
  • Liability value × Market rate at issuance
  • LiablityValue = e.g. Issue price of bond
45
Q

Interest burden

A

EBT/EBIT

46
Q

The proxy statement provides information about

A

management and board member compensation, as well as any conflicts of interest.

47
Q

Deferred tax assets result from

A
  • gains that are taxable before they are recognized in the income statement
  • losses that are recognized in the income statement before they are tax deductible
48
Q

deferred tax liabilities result from

A
  • gains that are recognized in the income statement before they are taxable
  • losses that are tax deductible before they are recognized in the income statement.
49
Q

Investing cash flows most likely reflect changes in

A

Noncurrent assets.

50
Q

Basic EPS

A
  • (Net income - preferred dividends)/(WA# of common sharesoutstanding)
    • DON’T use tax shield for preferred dividends
51
Q

A finance lease

A
  • add debt to the balance sheet => higher debt-to-capital ratio
  • higher interest expense (compared to operating)=> lower interest coverage ratio
  • net income will be lower in the early years (compared to operating lease)
52
Q

Cash return on assets

A

Cash flow from operations/Avg. Total Assets

53
Q

Earthquake (under GAAP)

A

as an extraordinary item net of taxes if it reports under US GAAP.

CFA (11 decks)

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