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CFA I > Financial Statements Study Session #7 > Flashcards

Financial Statements Study Session #7 Flashcards

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CFA flashcards
1
Q

3 Types of cash flow activities

A

Operating Activity
Investing Activity
Financing Activity

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2
Q

Cash Flow from Operating Activity

A

consists of inflows/outflows of cash resulting from transactions that affect a firms net income.

GAAP
In Out

Cash from Customers Cash paid to employees/suppliers
Interest/Dividends Received Cash paid for other expenses
Sale proceeds from trading Securities Acquisition of trading securities
Interest paid
Taxes paid

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3
Q

Cash Flow from Investing Activity

A

consists of inflows/outflows of cash resulting from the acquisition or disposal of long-term assets and certain investments.

GAAP
In Out
Sale proceeds from fixed assets Acquisition of fixed assets
Sale proceeds from debt/equity investments Acquisitions of debt/equity instruments
Principal rec’d from loans to others Loans made to others

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4
Q

Cash Flow from Financing Activity

A

consists of inflows/outflows of cash resulting from transactions affecting a firms capital structure.

GAAP
In Out
Principal amount of debt issued Principal paid on debt
Proceeds from issuing equity Payments to reacquire stock
Dividends paid to shareholders

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5
Q

Interest/Dividends Received under IFRS

Interest/Dividends Paid under IFRS

A

Interest and dividends received under IFRS may be reported as operating or investing activity.

Interest and dividends received under IFRS may be reported operating or financing activity.

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6
Q

Income taxes paid GAAP/IFRS (Cash Flow Statement)

A

Under GAAP all income taxes paid are under operating activities.
Under IFRS income taxes paid are operating activities unless the expense is associated with a investing or financing transaction.

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7
Q

Non-cash investing and financing activities (Cash Flow Statement)

A

not reported in the cash flow statement since they do not result in inflows/outflows of cash.

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8
Q

Direct Method (Operating Cash Flow)

A

XYZ Company

Cash Collections from Customers xx,xxx
Cash Paid to Suppliers (xx,xxx)
Cash Paid for operating Expense (xx,xxx)
Cash Paid for interest (xx,xxx)
Cash Paid for taxes (xx,xxx)
______
Operating Cash Flow xx,xxx

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9
Q

Indirect Method (Operating Cash Flow)

A

XYZ Company

Net Income xx,xxx
Adjust for non-cash items and
changes in working capital:
Depreciation and amortization xx,xxx
Deferred income taxes x,xxx
Change in A/R x,xxx
Change in A/P x,xxx
Change in Prepaid Exp. x,xxx
Change in Inventory x,xxx
Change in Accrued Liabilities x,xxx
_____
Operating Cash Flow

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10
Q

Calculate Cash Paid for New Asset (Investing Activity)

A

=Ending Gross Assets + grow cost of old assets sold - beginning gross assets

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11
Q

Calculate Cash from an asset sold (Investing Activity)

A

=book value of the asset + gain (or - loss) on sale

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12
Q

Calculate Cash Paid to Suppliers (Direct Method)

A

=COGS +/- change in inventory +/- change in A/P

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13
Q

Determine Beginning A/R, Ending A/R, Sales, Cash Collections (Direct Method)

A

Ending A/R = Beginning A/R + Sales - Cash Collections
‘
If you have and of the 3, solve for the 4th.

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14
Q

Calculate Free Cash Flow to Firm (FCFF)

A

=CFO + [1 x (1-interest rate)] - FCInv

where FCInc = Fixed Capital Investments (net)

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15
Q

Calculate Free Cash Flow to Equity (FCFE)

A

=CFO-FCInv+Net Borrowing

Net borrowing = debt issued - debt repaid

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16
Q

Common Size (Cash Flow Statement)

A

items listed as percentage of revenue

or

each inflow is expressed as a percentage of total inflows and each outflow is expressed as a percentage of total outflows

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17
Q

Calculate Cash Received From Customers

A

= Revenue +/- Change in A/R

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18
Q

Common Size (Balance Sheet)

A

=balance sheet/total assets

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19
Q

Receivables turnover

A

=annual sales/average receivables

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20
Q

Days of sales outstanding

A

=365/Receivables turnover

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21
Q

Inventory turnover

A

=COGS/Average Inventory

22
Q

Days of inventory on hand

A

=365/Inventory turnover

23
Q

Payables turnover

A

=purchases/average trades payable

24
Q

Number of days of payables

A

=365/payables turnover ratio

25
Q

Total asset turnover

A

=revenue/average total sales

26
Q

Fixed asset turnover

A

=revenue/average net fixed assets

27
Q

Working capital turnover

A

=revenue/average working capital

28
Q

Current ratio (liquidity)

A

=current assets/current liabilities

29
Q

Quick ratio (liquidity)

A

=Cash+marketable securities+receivables/current liabilities

30
Q

Cash ratio (liquidity)

A

=Cash+marketable securities/current liabilities

31
Q

Defensive interval (liquidity)

A

=Cash+marketable securities+receivables/avg. daily expenditures

32
Q

Cash conversion cycle (liquidity)

A

=Days sales outstanding+days of inventory on hand-number of days of payables

33
Q

Debt-to-equity (solvency)

A

=total debt/total shareholders equity

34
Q

Debt-to-capital (solvency)

A

=total debt/total debt+shareholders equity

35
Q

Financial leverage (solvency)

A

=average total assets/average total equity

36
Q

Interest coverage (solvency)

A

=EBIT/interest expense

37
Q

Fixed charge coverage (solvency)

A

=EBIT+lease payments/interest expense + lease payments

38
Q

Net profit margin (profitability)

A

=net income/revenue

39
Q

Total Capital

A

=long term debt+short term debt+ common and preferred equity

or

= total assets

40
Q

Gross profit margin (profitbility)

A

=gross profit/revenue

41
Q

Operating profit margin (profitability)

A

=EBIT/revenue

42
Q

Pretax margin (profitability)

A

=EBT/revenue

43
Q

Return on assets (ROA)

A

= net income/average total assets

or

=net income+interest expense(1-tax rate)/avg. total assets

44
Q

Return on total capital (ROTC)

A

=EBIT/Avg. total capital

45
Q

Dupont system of analysis

A

an approach used to analyze ROE.

Original approach or extended (5-way) DuPont equation

46
Q

a

A

s

47
Q

Retention Rate

A

=net income available to common-dividends/net income availible to common

=1-dividend payout ratio

48
Q

Dividend Payout ratio

A

=dividends declared/net income available to common

49
Q

Sustainable growth rate

A

g=RR x ROE

50
Q

Business Segments

A

portion of a company that accounts for more than 10% of a company’s revenues or assets.

51
Q

Basic DuPont Equation

A

=(NI/Sales)(Sales/assets)(assets/equity)

52
Q

Extended DuPont Equation

A

=(NI/EBT)(EBT/EBIT)(EBIT/Revenue)(Revenue/total assets)(total assets/total equity)

CFA I (2 decks)

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