Financial statement analysis

Question 1

What are the 6 steps in the financial statement analysis framework

Answer 1

1. State the objective of the analysis
2. Gather data
3. Process the data
4. Analyze and interpret the data
5. Report conclusions or recommendations
6. Update the analysis

Question 2

The are the roles of financial statement analysis

Answer 2

• Use to make economic decisions
• ## identify risk factors that affect the company’s future profitability and position.

Question 3

Financial reporting

Answer 3

way companies show their financial performance to investors, creditors, and other interested parties by preparing and presenting financial statements.

Question 4

Whaty are standard setting bodies

Answer 4

professional organizations of accountants and auditors that establish financial reporting standards.

Question 7

What are regulatory authorities

Answer 7

government agencies that have the legal authority to enforce compliance with financial reporting standards.

Question 8

What are the 2 primary standard-setting bodies

Answer 8

Financial Accounting Standard Board (US GAAP)
International Accounting Standard Board (IFRS)

IFRS = international financial reporting standards

Older IASB standards: International accounting standards (IAS)

Question 9

What are the different regulatory authorities

Answer 9

US : Securities and Exchange Commission (SEC)
UK: Financial Conduct Authority

Question 10

What is teh IOSCO and what does it stands for?

Answer 10

International Organization of Securities Commissions

Most national authorities belong to IOSCO. Toghether members of IOSCO regulate more than 95% of the world’s financial market.

Not regulatory body, but members work toghether to improve cross-border cooperation.

Question 11

What are the 3 IOSCO objectives

Answer 11

1. Protecting investors
2. Ensuring markets are fair, efficient and transparent
3. Reducing systemic risk

IOSCO requires issuers to provide full, accurate, and timely disclosure of financial results, risk, and other information used in the decision-making process. It also requires accounting standards that are used to prepare financial statements to be of a high standard and internationally accepted.

Question 12

Sarbanes-Oxley Act of 2002

Answer 12

act prohibits a company’s external auditor from providing certain additional paid services to the company, to avoid the conflict of interest involved, and to promote auditor independence.

requires a company’s executive management to certify that the financial statements are presented fairly and to include a statement about the effectiveness of the company’s internal controls of financial reporting. Additionally, the external auditor must provide a statement confirming the effectiveness of the company’s internal controls.

Question 13

SEC Required Filings

Answer 13

The SEC’s requirements for financial reporting by U.S. companies are shown in SEC Required Filings as an example of reporting requirements.

Question 14

Form S-1

Answer 14

This is the registration statement filed before the sale of new securities to the public.

Question 15

Form 10-K.

Answer 15

This is the required annual filing that includes information about the business, risks, and its management, audited financial statements and disclosures, and disclosures about legal matters involving the firm.

Question 16

Form 10-Q

Answer 16

.S. firms are required to file this form quarterly, with updated interim financial statements

Question 18

Form DEF-14A

Answer 18

When a company prepares a proxy statement for its shareholders before the annual meeting or other shareholder vote, it also files the statement with the SEC as Form DEF-14A.

Question 19

Form 8-K

Answer 19

Companies must file this form to disclose** material events** including significant asset acquisitions and disposals, changes in management or corporate governance, or matters related to its accountants, its financial statements, or the markets in which its securities trade.

Question 20

Form 144

Answer 20

A company can issue securities to certain qualified buyers without registering the securities with the SEC, but it must notify the SEC that it intends to do so.

Question 21

Forms 3, 4, and 5

Answer 21

beneficial ownership of securities by a company’s officers and directors. Analysts can use these filings to learn about purchases and sales of company securities by corporate insiders.