FSA Flashcards
(32 cards)
What is revenue recognition?
Revenue is recognised on the balance sheet when the good delivered or service is performed.
What are the 3 ways Sales on the income statement can be reported on the balance sheet?
1) Cash - at point of delivery
2) Accounts Receivable - cash after service
3) Deferred Revenue - cash before service
What is cost of goods sold?
Direct costs of production: Raw materials, depreciation, labour, maintenance and utilities. Only reported once the goods have been sold, the rest is inventory.
What is SG&A?
Selling, General and administrative costs. Non-production related business costs. Marketing, HR, IT, finance, head office.
What is EBIT on the balance sheet?
Operating Profit
What is EBITDA?
Operating Profit plus depreciation and amortization
Where can you find depreciation and amortization in balance sheet?
COGS and SG&A
What is depreciation/amortization?
Non-cash spreading of costs of machines/licensing
How do you ‘normalize’ profit?
Remove non-recurring items from the balance sheet. This includes: Restructuring charges, gains/losses on sale of business/assets, impairments of non-current assets, one-time charges/expenses.
What is the effective tax rate?
Tax expense/profits before tax. The average tax rate suffered by the company.
What is the marginal tax-rate?
Tax-rate applied to any additional profits. Statutory tax-rate.
What are the ETR and MTR used for?
ETR - forecasting global tax expense in operating financial models
MTR - estimating tax impact of marginal earnings/expenses (cleaning net income)
What is:
1) Earnings per share?
2) Return on Equity
3) Payout Ratio
4) Dividend yield
5) Earnings Yield
6) P/E Ratio
1) Net Income/ Weighted Average shares outstanding
2) Net Income/Book value equity
3) Dividend/Net Income
4) Dividend per share/Share Price
5) Diluted EPS/Share Price
6) Share Price/Diluted EPS
How do you normalise net income?
Net Income + (1-MTR)(Non-recurring costs)
What are current assets?
Assets expected to be used/sold within 1 year. Cash, Inventories, trade+other receivables, net provision for bad debts.
What is FIFO and LIFO?
Inventory Valuation methods: First-In, First-Out and Last-In, Last-Out.
What are current liabilities?
Short-term debt/interest bearing debt, dividends payable, Accounts payables, accrued expenses, taxes payable.
What is operating working capital?
Operating Current Assets - Operating Current Liabilities
What are the operating elements of current assets/liabilities?
Assets - Inventories, Accounts receivable, Prepayments
Liabilities - Accounts payable, accrued expenses, taxes payable
What does it mean to have negative OWC?
Caused by a deferral of payment, - it is advantageous as cash is available for longer
What does it mean to have positive OWC?
Money is tied up and have to wait to receive it - drawback as less cash is available sooner
What is ‘Inventory days’? Is it advantageous to be high or low?
Number of days between gaining the raw materials and delivery of the product. Want to be low as lower storage costs.
What is ‘Receivable days’? Is it advantageous to be high or low?
Number of days between delivery of product and when the cash received. Want to be low as is it advantageous to have cash as quickly as possible.
What is ‘Payable days’? Is it advantageous to be high or low?
Number of days between gaining the raw materials and paying the supplier. Want to be high as possible, postponing payment is desirable.
