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CFA Self Study > Financial Stmts and Analysis > Flashcards

Financial Stmts and Analysis Flashcards

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CFA flashcards
1
Q

Accelerated vs Straight Line Depreciation

A

In early years of an asset, Straight Line will result in lower depreciation and thus higher net income than accelerated

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2
Q

Straight Line Depreciation

A

= (cost - residual value) / useful life

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3
Q

Double Declining Balance Method

A

= (2 / Useful Life) (asset cost - accumulated depreciation)

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4
Q

When if LIFO best?

A

in an inflationary environment bc it will decrease the taxable income

-not allowed under the IFRS

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5
Q

Potentially dilutive securities

A

include stock options, warrants, convertible preferred stock

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6
Q

Dilutive Securities

A

Securities that would decrease EPS if exercised and converted into common stock

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7
Q

Antidilutive Securities

A

securities that would increase EPS in converted to common stock

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8
Q

Simple Capital Structure

A

only contains common stock, nonconvertible debt & nonconvertible preferred stock

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9
Q

Complex Capital Structure

A

includes potentially dillutive securities like options, warrants, or convertible securities

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10
Q

Basic EPS equation

A

= (net income - preferred dividends) / Weighted average number of common shares outstanding

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11
Q

Determine if a convertible security is dilutive

A

convertible pfd dividends / # shares from created from conversion

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12
Q

Treasury Stock Method explained

A

hypothetical funds received by the company are used to purchacse shares of own common stock

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13
Q

Treasury Stock Method of new Shares =

A

((avg mkt price - exercise price) / avg mkt price) * #Of shares covered

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14
Q

comprehensive income is

A

A measure that includes all changes to equity other than owner contributions and distributions

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15
Q

Classified Balance Sheet

A

-similar items are grouped together

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16
Q

Liquidity Based Balance Sheet Presentation

A

available for use under the IFRS

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17
Q

Held to Maturity Securities

A

shown on balance sheet at amortized cost, which is the par value plus any discount or premium paid

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18
Q

Trading Securities

A
  • held with the intent of profiting in the short term,

- reported at FAIR VALUE on the balance sheet

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19
Q

Available-for-sale-Securities

A
  • Debt and equity not expexted to be held to maturity

- Reported at FAIR VALUE on the balance sheet

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20
Q

Treasury Stock

A

stock that has been reacquired by the issuing firm, but not yet retired

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21
Q

Current Ratio

A

Current assets / current liabilities

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22
Q

Quick Ratio

A

(cash +mkt securities + A/R) / current liabilities

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23
Q

Cash Ratio

A

(Cash + mktable securities) / Current Liabilities

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24
Q

Financial Leverage Ratio

A

Total assets / Total Equity

25
Q

Solvency Ratios

A

measures risk and ability to satify long term obligations, the higher the ratio, the higher the leverage and thus the higher the risk

26
Q

Preferred Cash Flow Method

A

Direct Method

27
Q

Direct Method

A

Shows operating income by converting income statement items and adding/subracting changes from balance sheet

28
Q

Indirect Method

A

Begin with Net Income and add or subtract from there

29
Q

Investing Cash Flows (CFI)

A

= Proceeds from sale of assets - expendatures on new assets

30
Q

Net CF from Creditors =

A

= new borrowings - principal repaid

31
Q

Free Cash Flow

A

measure of cash that is available for discretionary purposes after obligations have been covered

32
Q

Common-size format

A

a CF statement that expresses each line item as a percentage of cash flow

33
Q

Free Cash Flow to Firm (FCFF) from NI

A

= Net Income + non-cash charges + [interest expense x (1- tax)] - net capital investment - working capital investment

34
Q

Free Cash Flow to Equity (FCFE)

A

= CFO- net CAPEX + net borrowings

35
Q

Cash Return on Assets

A

CFO / Average Total Assets

36
Q

Debt Coverage Ratio

A

CFO/ Total Debt

37
Q

Interest Coverage

A

= (CFO + interest paid + taxes Paid)/ Interest Paid

38
Q

Liquidity Measures

A

Current Ratio and Quick Ratio

39
Q

Receivables Turnover

A

Annual Sales/ Average Receivables

40
Q

Inventory Turnover

A

COGS/ Average Inventory

41
Q

Payables Turnover Ratio

A

Purchases/ Average Trade Payables

42
Q

Days of Sales outstanding

A

365/ Receivables Turnover

43
Q

Days of invenory on hand

A

365 / inventory turnover

44
Q

Number of days Payable

A

365 / Payable Turnover ratio

45
Q

Cash Conversion Cycle Equatino

A

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

46
Q

Total Asset Turnover

A

revenue / avg total assets

47
Q

Fixed asset Turnover

A

revenue / average net fixed assets

48
Q

Working Capital Turnover

A

revenue / avg working capital

49
Q

Measures of operating performance

A

Total asset turnover, fixed asset turnover, working capital turnover.
Essentially just take revenue over whatever type you are trying to solve

50
Q

Costs included in Inventory on B.S

A

Purchase cost, converstion cost, allocation of fixed production overhead, other costs to bring inventory to current location

51
Q

IFRS Inventory

A

LIFO is not allowed

52
Q

GAAP Inventory

A

valued at the lower of cost or market value

53
Q

Periodic Inventory System

A

inventory values and COGS are determined at the end of the accounting perido

54
Q

Inventory Turnover and Inventory

A

Inventory Turnover is higher for LIFO than FIFO

55
Q

Capitalization and net income

A

capitalizing expenses decreases expenses

56
Q

Capitalizatin of expenses vs capitalization of leases

A

Expenses: creates an asset
LEases: asset and liability are created

57
Q

Income Tax Expense

A

noncash income stmt item that includes cash tax expense plus any increase in in deferred tax libility

58
Q

Most common reason for deferred tax liability

A

depreciation expense on the I.S. is less than depreciation on the tax return

CFA Self Study (6 decks)

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