Financial statement analysis condensed Flashcards
Primary purpose of financial statements and the four basic statements
Describe the balance sheet, income statement and statement of comprehensive income
Statement of changes in owners equity does what? Three types of cashflows?
Notes to financial statements includes?
Management, discussion and analysis provides what?
Audit provides an opinion on what and the types of opinions?
What is involved in the financial analysis framewok?
- purpose
- collect data
- process data
- analyze/interpret
- communicate conclusions
- follow up
What is the objective of financial reporting?
Financial reporting standards do what?
IFRS, IASB, US GAAP, FASB are what?
Regulatory authorities like SEC are ?
The fundamental characteristics of FS’ are what?
FS enhancing characteristics are?
Elements of financial position and measurement of performance?
The two underlying assumptions?
Measurements of elements can be done using?
What are the required statements?
What are the general features?
What are the two major standards and have they converged?
An income statement can be presented in what two ways?
Three components of the income statement?
Multi-step IS example?
Under accrural basis when is revenue recognised?
When does ownership occur?
Describe period and product costs?
Under IFRS depreciation for the cost model must what?
Under IFRS revaluations are …. and under US GAAP?
What is done with discontinued line items, unusual items and changes in accounting policy?
Basic EPS fomula?
Convertible preferred and convertible debt formula?
Diluted EPS treasury stock method?
Gross profit margin, operating profit margin and NI margin?
What is included in other comprehensive income?
A=L+E can be interpreted as ?
Under IFRS/US GAAP what defines current/non-current?
Difference between classified and liquidity based presentation?
Working capital =?
What is included in current assets and what happens if NRV < carrying values?
Difference between IFRS and GAAP with inventory writedowns?
What is included in current liabilities?
Inventory write down reversals are not allowed under GAAP
How are non-current assets (PP&E) recorded on BS under IFRS and GAAP?
Describe cost and revaluation model?
How are intangible non-current assets and financial assets recorded/valued?
What is included in non-current liabilities and equity?
What are the liquidity and solvency ratios?
What does each cash flow refer to and interest and dividends are treated how under IFRS/US GAAP?
What happens in the direct method?
Direct method cash paid to suppliers, employees and other expenses?
Describe the indirect method
Free cashflow to firm formula, FCF to equity and the performance and coverage ratios
Describe the framework for financial analysis, what is the guiding question what do ratios achieve?
What are the acitivity ratios of inventory turnover, recievables turnover, DOH, DSO?
Payables turnover, days payable, working capital turnover, FA turnover, TA turnover, current quick and cash ratio?
What is the cash conversion cycle?
Describe operating and financing leverage?
Interest coverage and fixed charge?
Profitability ratios?
Operating ROA?
ROA, return on total capital, ROE, return on common equity formulas
Dupont analysis: ROE»_space;,
What is the DPR, RR and segment reporting?
What costs are included for inventories?
Manufacturing costs include?
IFRS/ US GAAP methods of recording inventory?
Difference between perpetual and periodic inventory?
Cost of inventory is recorded under IFRS and US GAAP how?
IFRS or GAAP allow reversals?
What has to be disclosed for inventory?
Inventory ratios, Inv turnover, DOH
Effect of LIFO on IS and BS? What has to be dsiclosed with US GAAP LIFO?
BS and IS adjustment formulas for LIFO
Capitalised vs expensed? How PPE is treated when purchasing and when constructing (IFRS vs GAAP)?
Ratio analysis includes all capitalised interest? IFRS intangible asset recognition criteria?
Valued if purchased?
Intangible assets developed internally do what with the cost ?
How is R&D treated under IFRS and GAAP?
In a business acquisition IFRS and GAAP differ with valuing assets how?
IFRS and GAAP on the cost model of depr?
IFRS and GAAP on revaluation model of depr?
Three methods of depr/ammort?
Component method of dep is required by who and allowed by who?
Revaluation model formula, how are revaluations carried through BS and IS and can there be reversals and what happens with excess?
How do IFRS and GAAP treat impairment?
Impairment for finite and infinite life assets?
Impairment reversals IFRS and GAAP?
Disposal of assets on IS and for exchange of assets?
What needs to be disclosed under IFRS and GAAP for depreciation of long-lived assets?
Treatment of investment property under GAAP and IFRS and reclassifications?
What is accounting profit and taxable income?
what is tax base?
Explain how DTA and DTLs arise and where they are on BS for IFRS and GAAP? If past DTA/DTL is doubtful then what under IFRS and GAAP?
How is the tax base determined?
How do changes in tax rates affect DTL and DTA and what happens with gains and losses?
Non current liabilities are initially recognised at what?
Interest expense=?
Interest payment=?
Amortisation=? for premium and discount?
Bonds payable over life of bond for discount and premium?
What are the two methods of ammortisation?
Interest paid on cashflow statement for iFRS and GAAP?
and what happens for ammortz
Explain the impact on the FS’s for bonds at maturity versus before maturity?
Difference between positive and negative covenants?
What is a current and non-current liability?
Benefits of leasing vs buying an asset?
How are leases recorded for IFRS?
How are leases recorded for GAAP- opp and finc?
Explain lessor accounting for IFRS/GAAP?
IS - no interest is recognized
- full payment is revenue (CFO)
How are defined benefit and contribution plans recorded on FS’s?
For IFRS and GAAP?
GAAP/ Past service costs + remeasurements ➞ OCI
Explain financial reporting quality vs quality of reported results?
GAAP categories
Explain the difference between choosing aggressive, conservative and earnings smoothing policies?
What could me motives for mangement for low quality reports?
Three conditions for management to do this?
What are the quality mechanisms to prevent this?
Difference between pro-forma and GAAP presentation choices?
What must you do if a non-GAAP measure is used?
Explain the different ways of revenue recognition?
What the accounting choices that management have?
