Financial Reporting and Analysis Flashcards
How unrealized gain would be treated for Trading securities, available for sale and Held to maturity?
Retained earnings in BS for trading securities, OCI/ accumulated other comprehensive income (a component of owner’s equity) for available for sales and ignored for held to maturity.
What is Cash Conversion Cycle?
Days of Sales outstanding+ Inventory at hand- number of days of payable.
What is Days of Sales outstanding?
365/ receivables turn over.
Motivation/Opportunity for non-compliance.
Meeting its own earnings guidance could be motivation for non-compliance. Weak governance would be an opportunity for non-compliance.
What is working capital?
Current asset or current asset-current liability.
Which industry typically has high dividend yield stocks?
Financial firms.
Growth firm has high or low P/E ratio?
High. since firms are expected to grow, that expectation is reflected in Price.
How to calculate Double Declining Balance Depreciation?
(Cost-accumulated depreciation)/useful life*2 NB: Do not consider salvage value.
FIFO Inventory is preferred to LIFO Inventory and LIFO COGS is preferred to FIFA COGS when
prices are changing.
What is Diluted EPS?
[NI-preferred dividends+ convertible interest (1-t)]/[weighted average shares+ convertible debt shares] or adjusted income available for common shares/ weighted average common and potential common shares outstanding
How horizontal and vertical common-sized balance sheets are used?
Horizontal sized balance sheet is used for time series analysis and vertical one is for cross sectional analysis.
What is the valuation allowance?
Contra account to reduce Deferred Tax Asset. Increase in valuation allowance means reduce estimate of future profitability.
