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CFA Level I (Joeker) > FSA > Flashcards

FSA Flashcards

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1
Q

Characteristics of a Coherent

Financial Reporting Framework

A
  • Transparency
  • Consistency
  • Comprehensiveness
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2
Q

Fundamental Characteristics of Financial Statements

A

U.S. GAAP

  • Relevence
  • Faithful Representation

IFRS

  • Fair Presentation
  • Going Concern
  • Accrual Basis
  • Consistency & Materiality
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3
Q

Enhancing Characteristics of Financial Statements

A
  • V erifyability
  • C omparability
  • U nderstandability
  • T imeliness
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4
Q

Elements of

Financial Statements

A

Balance Sheet

  • Assets
  • Liabilities
  • Owners Equity

Income Statement

  • Revenues
  • Expenses
  • Gains & Losses
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5
Q

Factors that Contribute to Reliability in IFRS

A
  • Substance over Form
  • Faithful Representation
  • Nutrality
  • Prudence
  • Completeness

(SOFFR’N-PC)

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6
Q

Activity Ratios

A
  • Receivables Turnover, DSO
  • Inventory Turnover, DOH
  • Payables Turnover, DOP
  • Total Asset Turnover
  • Fixed Asset Turnover
  • Working Capital Turnover
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7
Q

Receivables Turnover

A

Revenue

————————————

Average Receivables

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8
Q

Days Sales Outstanding

DSO

A

365

————————————

Receivables Turnover

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9
Q

Inventory Turnover

A

COGS

———————————

Average Inventory

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10
Q

Days of Inventory on Hand

DOH

A

365

———————————

Inventory Turnover

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11
Q

Payables Turnover

A

Purchases

——————————

Average Payables

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12
Q

Number of days of Payables

DOP

A

365

——————————

Payables Turnover

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13
Q

Total Asset Turnover

A

Revenue

————————————

Average Total Assets

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14
Q

Fixed Asset Turnover

A

Revenue

——————————————

Average Net Fixed Assets

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15
Q

Working Capital Turnover

A

Revenue

—————————————

Average Working Capital

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16
Q

Liquidity Ratios

A
  • Current Ratio
  • Quick Ratio
  • Cash Ratio
  • Defensive Interval
  • Cash Conversion Cycle
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17
Q

Current Ratio

A

Current Assets

——————————

Current Liabilities

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18
Q

Quick Ratio

(Acid Test)

A

Cash + Marketable Securities + Receivables

————————————————————————

Current Liabilities

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19
Q

Cash Ratio

A

Cash + Marketable Securities

————————————————

Current Liabilities

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20
Q

Defensive Interval

A

Cash + Marketable Securities + Receivables

———————————————————————

Average Daily Expenditures

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21
Q

Cash Conversion Cycle

A

DSO + DOH - DOP

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22
Q

Solvency Ratios

A
  • Debt-to-Equity
  • Debt-to-Capital
  • Debt-to-Assets
  • Financial Leverage
  • Interest Coverage
  • Fixed Charge Coverage
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23
Q

Debt-to-Equity Ratio

A

Total Debt

———————

Total Equity

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24
Q

Debt-to-Capital Ratio

A

Total Debt

—————————————

Total Debt + Total Equity

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25
Q

Debt-to-Assets Ratio

(Debt Ratio)

A

Total Debt

———————

Total Assets

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26
Q

Financial Leverage Ratio

A

Avg Total Assets / Avg Total Equity

or

ROE / ROA

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27
Q

Interest Coverage Ratio

A

EBIT

——————————

Interest Payments

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28
Q

Fixed Charge Coverage Ratio

A

EBIT + Lease Payments

————————————————————

Interest Payments + Lease Payments

29
Q

Profitability Ratios

A
  • Net Profit Margin
  • Gross Profit Margin
  • Operating Profit Margin
  • Pretax Margin
  • ROA
  • Operating Return on Assets
  • Return on Total Capital
  • Return on Equity
  • Return on Common Equity
30
Q

Net Profit Margin

A

Net Income

———————

Revenue

31
Q

Gross Profit Margin

A

Gross Profit

———————

Revenue

32
Q

Operating Profit Margin

A

EBIT

——————

Revenue

33
Q

Pretax Margin

A

EBT

——————

Revenue

34
Q

Return on Assets

ROA

A

Net Income

————————————

Average Total Assets

or

Net Income + Interest Expense (1 - t)

———————————————————

Average Total Assets

35
Q

Operating Return on Assets

A

EBIT

————————————

Average Total Assets

36
Q

Return on Total Capital

ROTC

A

EBIT

————————————

Average Total Capital

37
Q

Return on Common Equity

A

Net Income - Pref Div

—————————————

Average Common Equity

38
Q

Performance Ratios

A
  • Cash Flow-to-Revenue
  • Cash Return-on-Assets
  • Cash Return-on-Equity
  • Cash-to-income
  • Cash Flow Per Share
39
Q

Cash Flow-to-Revenue Ratio

A

CFO

————————

Net Revenue

40
Q

Cash Return-on-Assets Ratio

A

CFO

————————————

Average Total Assets

41
Q

Cash Return-on-Equity Ratio

A

CFO

————————————

Average Total Equity

42
Q

Cash-to-Income Ratio

A

CFO

——————————

Operating Income

43
Q

Cash Flow Per Share

A

CFO - Preferred Dividends

———————————————

WASO

44
Q

Coverage Ratios

A
  • Debt Coverage Ratio
  • Interest Coverage Ratio
  • Reinvestment Ratio
  • Debt Payment Ratio
  • Dividend Payment Ratio
  • Investing and Financing Ratio
45
Q

Debt Coverage Ratio

A

CFO

——————

Total Debt

46
Q

Reinvestment Ratio

A

CFO

—————————————————

Cash Paid for Long Term Assets

47
Q

Debt Payment Ratio

A

CFO

——————————————————

Cash Long-Term Debt Repayment

48
Q

Dividend Payment Ratio

A

CFO

————————

Dividends Paid

49
Q

Investing and Financing Ratio

A

CFO

————————————————————————————

Cash Outflows from Investing and Financing Activities

50
Q

Return on Equity

ROE

A

Net Income

————————————

Average Total Equity

51
Q

Original DuPont Equation

A

ROE = ROA * Financial Leverage

or

ROE = Profit Margin * Asset Turnover * Leverage Ratio

       Net income           Revenue          Assets

——————— X —————— X —————

 Revenue              Assets             Equity

(NRAE)

52
Q

Extended DuPont Equation

A

ROE = Tax Burden * Interest Burden * EBIT Margin *

Asset Turnover * Financial Leverage

NI EBT EBIT Revenue Assets

——— X ——— X ————— X ————— X —————

EBT EBIT Revenue Assets Equity

(NeERAE)

53
Q

Free Cash Flow to the Firm

FCFF

from CFO

A

CFO

+ Interest Expense(1 - t)

  • Fixed Captial Investment
54
Q

Free Cash Flow to the Firm

FCFF

from Net Income

A

Net Income

+ Non-Cash Charges to Income

+ Interest Expense(1 - t)

  • Fixed Capital Investment
  • Working Capital Investment
55
Q

Free Cash Flow to Equity

FCFE

from CFO

A

CFO

+ Net Borrowing

  • Fixed Capital Investment
56
Q

Basic EPS

A

Net Income - Preferred Dividends

——————————————————

WASO

57
Q

Diluted EPS

A

NI - Pref Div + Conv Debt Int(1 - t) + Conv Pref Div

————————————————————————————

WASO + Debt Shares + Pref Shares + Option Shares

58
Q

Purchases

A

COGS + End Inv - Beg Inv

59
Q

FIFO from LIFO

A

FIFO Inv = LIFO Inv + LIFO Reserve

60
Q

FIFO COGS

from

LIFO COGS

A

FIFO COGS = LIFO COGS - Change in LIFO Reserve

61
Q

Income Tax Expense

A

Taxes Payable + Net ► DTA & DTL

62
Q

Working Capital

A

Current Assets - Current Liabilities

63
Q

CFO

Indirect Method

A

Net Income

  • Cash Gains from Investing & Financing

+ Non-Cash Charges to Income (Dep,Amort)

  • Non-Cash Components to Revenue
  • Increases in Asset Accounts

+ Increases in Liability Accounts

64
Q

Average Age of Assets

A

Accumulated Depreciation

————————————————

Annual Depreciation Expense

65
Q

Fraud Triangle

A
  • R ationalizations
  • I ncentives
  • O pportunities

(Blame it on Rio)

66
Q

Cash Paid to Suppliers

A

Purchases + Inc in A/P

67
Q

Impairment Loss Under IFRS

A

Carrying Value - Recoverable Amount

Recoverable Amount = The greater of the value in use or the fair value less costs to sell.

68
Q

Price to Earnings Ratio

P/E

A

Dividend Payout Ratio

————————————

Required ROE - g

CFA Level I (Joeker) (10 decks)

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