Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFA > SS 8. FR&A: Income Statements, Balance Sheets and Cash Flow Statements > Flashcards

SS 8. FR&A: Income Statements, Balance Sheets and Cash Flow Statements Flashcards

You may prefer our related Brainscape-certified flashcards:
CFA flashcards
1
Q

The par value of common stock is defined as:

A

the stated or nominal value assigned to the stock.

It has no relationship to market value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

The cumulative amount of earnings recognized on a company’s income statements that have not been distributed as dividends to the company’s owners is best described as:

A

retained earnings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Where assets, liabilities and equity are all in one column, this is called a:

A

Report format

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Cash return on assets =

A

Cash flow from operations
/
Average total assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the proper classification of interest received in the Statement of Cash Flows under IFRS?

A

Operating or Investing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Extraordinary items are placed on the income statement:

A

after net income from continuing operations and net of tax.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

In the direct method statement of cash flows, the primary component of investing cash flow is typically:

A

capital expenditures for long-term assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Under U.S. GAAP, how are dividends paid and dividends received reported on the cash flow statement?

A

Dividends received: Operating

Dividends paid: Financing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The obligations of an entity resulting from previous transactions that are expected to result in an outflow of economic benefit in the future is the definition of a:

A

Liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Income statement equation is:

A

revenues - expenses = net income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Cash ratio =

A

(Cash + cash equivalents + invested funds)
/
current liabilites

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

‘Stock that has been reacquired by the issuing firm but not yet retired’ is called:

A

Treasury stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Cash from Operations using the indirect method =

A

net income
+ non cash charges - non cash gains
+ increase in current liabilites - decrease in current liabilites
+ decrease in current assets - inrease in current assets
+ cash interest income - cash interest expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Working Capital =

A

Current Assets - Current Liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Current ratio =

A

Current assets / current liabilites

or

(Cash + marketable securities + receivables + inventory) / current liabilites

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Free Cash Flow to Equity (FCFE) =

A

CFO (Cash Flow from Operations) - net fixed capital expenditures + net borrowing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

As a general rule, revenue is normally recognised when it is:

A

Realizable and Earned

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

The definition of a current liability is:

A

Settlement is expected within one year or one operating cycle, whichever is greater.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How are Inventories valued under IFRS and U.S. GAAP?

A

IFRS: lower of cost or net realizable value

GAAP: lower of cost or market value

Inventory write-up allowed under IFRS, not GAAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the preferred method for revenue recognition if estimates relating to total revenue and costs are not reliable?

A

The completed-contract method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Basic EPS =

A

(Net income - Preferred Dividends)
/
Weighted average no. of shares outstanding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Receivables Turnover ratio =

A

Net credit sales
/
Average accounts receivable

23
Q

Ending retained earnings =

A

opening retained earnings + earnings after tax - dividends paid

24
Q

Under U.S. GAAP, the format of the income statement:

A

is not specified

25
Q

‘The process of converting non-cash resources and rights into money’ is called:

A

Realization

26
Q

‘Outflows or depletions of assets in the course of a business’s activities’ defines:

A

Expenses

27
Q

Only in the ______ method is depreciation added back to net income when determining CFO because net income is only used in the ______ method

A

Indirect

28
Q

Traditional DuPont equation is:

A

ROE = (net income / sales)(sales / assets)(assets / equity)

or

ROE = (net profit margin)(asset turnover)(leverage ratio)

Leverage ratio is also known as financial leverage or equity multiplier.

29
Q

Under which situations does an analyst need to adjust both the numerator and the denominator for calculating diluted EPS?

A

If the dilutive security is:

A convertible bond

Preferred shares

30
Q

Under the direct method, the only section of the cash flow statement that will differ in presentation is the:

A

Cash Flow from Operations

31
Q

Under IFRS, dividend payments are classified as:

A

Operating or Financing

32
Q

Under US GAAP, operating activities generally involve:

A

producing and delivering goods and providing services

33
Q

A complex capital structure is one that contains:

A

securities that have the potential to dilute a firm’s earnings per share.

34
Q

How does the indirect method calculate cash flow?

A

Indirect method starts with income after taxes and adjusts backwards for non-cash and other items for operating activities only.

35
Q

How are dividend payments reported on the statement of cashflows under US GAAP and IFRS?

A

Financing activities under U.S GAAP, and operating or financing activities under IFRS

36
Q

Long-term debt =

A

100% - (% equity + % current liabilities)

37
Q

The accounting concept of fair value is best described as:

A

The price that knowledgeable and willing parties would pay in an arms length transaction

38
Q

Diluted EPS formula:

A

(Total income - preferred dividends)
/
(Outstanding shares + diluted shares)

39
Q

An item that gives a company future economic benefits because it is owned or controlled by the company as a result of a previous transaction is best described as a(n)

A

Asset

40
Q

Quick ratio =

A

(Current assets - inventories) / current liabilites

or

(cash and equivalents + marketable securities + accounts receivable)
/
current liabilities

41
Q

If a balance sheet shows the assets in one column and liabilities and equity in an adjacent column, this is called:

A

Account format

42
Q

Reversal of impairments are allowable under:

A

IFRS

NOT U.S. GAAP

43
Q

Cash Conversion Cycle (CCC) =

A

Average receivables collection period
+ Average inventory processing period
- Average payables payment period

44
Q

Unrealized foreign currency translation gains and losses are not reported in the income statement and are included in:

A

comprehensive income.

45
Q

Under U.S. GAAP, in a cash flow statement, are interest paid and received, respectively, classified as operating or investing activities?

A

Operating, operating

46
Q

Defensive interval ratio =

A

current assets / daily operational expenses

Answer is expressed as a number of days.

47
Q

Other Comprehensive Income =

A

Comprehensive Income - Net Income

48
Q

When preparing a direct method statement of cash flows, the principal component of cash flows from operating activities is:

A

Cash collections

49
Q

Average Collection Period =

A

Days x AR
/
Credit Sales

50
Q

Transactions included in other comprehensive income (4):

A

1 . Foreign currency translation gains and losses.

  1. Adjustments for minimum pension liability.

3 . Unrealized gains and losses from cash flow hedging derivatives.

  1. Unrealized gains and losses from available-for-sale securities.
51
Q

Give examples of 4 short-term liquidity ratios

A

Current ratio
Quick ratio
Cash ratio
Defensive interval ratio

52
Q

Held-to-maturity (HTM) securities are reported on the balance sheet at (1) _____________ whereas available-for-sale securities (AFS) are reported at (2) __________.

A
  1. Amortized cost

2. Fair market value

53
Q

Retained cash flow is most likely to be defined as:

A

Operating cash flow before working capital changes less dividends

54
Q

Extended DuPont equation is:

A

ROE =

(net income/ EBT)(EBT/ EBIT)(EBIT / revenue)(revenue / total assets)(total assets / total equity)

or

ROE =

(tax burden)(interest burden)(EBIT margin)(asset turnover)(financial leverage)

CFA (20 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions