Financial Reporting & Analysis Flashcards
Cash conversion cycle (a.k.a. net operating cycle)
(Inventory turnover + Receivable TO - Payables TO)*365
Inventory turnover
COGS/Average inventory
Receivables turnover
Sales/Average AR
Payables turnover
Purchases/Average AP COGS can be used instead of Purchases
Cash Flow statement - interest paid
IFRS vs US GAAP
IFRS - financing or operating US GAAP - operating only
FCFF
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)
Pension Expense
Defined contribution plan + Defined benefit plan
Debt-to-capital
Total debt/ (total debt + total Shareholders equity)
*Total debt include only interest bearing debt
Intangibles must be valued at historical cost (US or IFRS?)
US GAAP
Current Assets/Liabilities before long-term (US or IFRS?)
US GAAP
IFRS: financial information fundamentals
- Relevance
- Faithful representation
Deferred tax balance
Temporary difference balance * tax
Compound annual growth rate
ROE
- 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.
Cash to income
CFO/Operating income
Fixed charge coverage ratio
(NI + Income tax exp + Interest + Lease)/(Interest + Lease)
Financial leverage ratio
Avg. Total Assets/ Avg. Total Equity
Quick ratio
The present value of the operating leases should be added to
both the total debt and the total assets.
OFFTOPIC:
BGN mode value = ?
END mode value * (1+i)
Net realizable value (NRV)
estimated selling price less the estimated costs necessary to get the inventory ready for sale and make the sale
IFRS:
condition that must be met for revenue recognition to occur
- 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.
Cash flow from operations calculation:
Sarbanes–Oxley Act
The adequacy of internal control over financial reporting
Diluted EPS calculation
(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.
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:
sustainable growth rate ?
- g=RR*ROE
- RR= 1 - dividend payout ratio
Financial ratios alone are not sufficient to determine
creditworthiness of a company
Bonds payable issued by a company are financial liabilities that are usually measured at
amortized cost.
(under IFRS ) Dividends received can be classified as
either an operating or investing activity but not as financing
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
held for use until disposal and continue to be depreciated until that time.
Under IFRS the statement of comprehensive income should most appropriately begin with:
the profit or loss from the income statement.
Debt payment ratio
Cash flow from operations/Cash paid for long-term debt repayment
Treasury stock is
non-voting and does not receive dividends.
Under IFRS, the carrying amount is compared with
Recoverable amount = higher of:
- fair value minus costs to sell
- present value of expected future cash flows
The cash from operations is lower if the lease is classified as
operating lease
Tax burden ratio
Net income/Earnings before tax
Cash flow debt coverage ratio
CFO/Total debt
A stock split is treated as
- if it occurred at the beginning of the year
- считаем среднее количество, будто ничего не было и вконце умножаем на 2
Basic EPS ? Diluted EPS
- Basic > Diluted
- Diluted EPS must be less than basic EPS.
- Otherwise Diluted EPS=Basic EPS
Software development is allowed by which standard?
US GAAP
Capitalization of development costs - ?
IFRS allows development costs to be capitalized if certain criteria are met;
Adjust LIFO method to compare with FIFO method
Current inventory + LIFO Reserve
Interest expense =
- Liability value × Market rate at issuance
- LiablityValue = e.g. Issue price of bond
Interest burden
EBT/EBIT
The proxy statement provides information about
management and board member compensation, as well as any conflicts of interest.
Deferred tax assets result from
- 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
deferred tax liabilities result from
- 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.
Investing cash flows most likely reflect changes in
Noncurrent assets.
Basic EPS
- (Net income - preferred dividends)/(WA# of common sharesoutstanding)
- DON’T use tax shield for preferred dividends
A finance lease
- 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)
Cash return on assets
Cash flow from operations/Avg. Total Assets
Earthquake (under GAAP)
as an extraordinary item net of taxes if it reports under US GAAP.
