Unit 9: Financial Reporting

Question 1

What kind of reporting does the SEC require from Publicly trades companies?

Answer 1

Quarterly and annual financial reports that include balance sheet and income statement
Form 10-K: annual report
Form 10-Q: quarterly report (unaudited)
Form 8-K: newsworthy events - file within 4 days of event
Annual report to all shareholder (can use 10K)

Question 2

What is a balance sheet?

Answer 2

Outlines Assets vs. Liabilities

Question 3

How do you determine net worth?

Answer 3

Net worth - Assets - Liabilities
AKA: Shareholder’s Equity/Owner’s Equity

Question 4

What are Current Assets?

Answer 4

cash, accounts receivable, inventory, prepaid expenses

Question 5

What are Fixed Assets?

Answer 5

property, equipment (depreciated value = cost - accumulated depreciation)

Question 6

What are Intangible Assets?

Answer 6

Formulas, brand name, trademarks

Question 7

What are Current Liabilites?

Answer 7

accts payable, wages payable, long term debt due within 12 months notes payable, accrued taxes

Question 8

What are Long-term Liabilities?

Answer 8

Debts, bonds, mortgages due after more than 12 months

Question 9

What are companies required to include in Financial statement footnotes?

Answer 9

potential legal actions, accounting methods, any off-books debt

Question 10

What is Financial Leverage?

Answer 10

The use long term debt to increase return on equity.

Question 11

When does it mean if a company is highly leveraged?

Answer 11

High ratio of debt to equity(50% or more)

Question 12

What is capital stock at par?

Answer 12

A liability
preferred & common stock listed at par value (IPO price)

Question 13

What is capital in excess of par?

Answer 13

A liability
paid in surplus, excess of IPO price

Question 14

What are retained earnings?

Answer 14

A liability
earnings not paid out in dividends

Question 15

What is treasury stock?

Answer 15

Stock repurchased by company - increases equity, reduced net worth

Question 16

What is company capitalization?

Answer 16

sum of long term debt and equity securities

Question 17

What happens when dividends are paid out?

Answer 17

retained earnings go down, cash (assets) go up and liabilities go up until paid out, then assets go down and liabilities go down.

Question 18

What is the Form 8-K?

Answer 18

Filed by Investment Company to SEC anytime a newsworthy event occurs
EX. M&A , bankruptcy, member of board resigns
Must file within 4 days of event

Question 19

What is the Form 10-K?

Answer 19

Annual report filed by Investment Company to the SEC
comprehensive overview of business and financial conditions - includes financial statements

Question 20

What is the Form 10-Q?

Answer 20

Quarterly report filed by Investment Company to the SEC - unaudited financial statements

Question 21

What are publicly traded companies required to provide to shareholders?

Answer 21

Annual Reports (can use form 10-K instead)

Question 22

What is the difference between cash accounting and accrual accounting?

Answer 22

accrual accounting- Logs the income when sale is booked
Cash accounting- Logs the income when the money is actually received

Question 23

What is included on a Cash Flow Statement?

Answer 23

shows money from operations, financing, and investing but not accounting changes

Question 24

What is included on an Income Statement?

Answer 24

Shows profit and loss
based on revenues and COGS (cost of goods sold )
Gross margin = Gross operating profit = Revenue - COGS (divide by revenue to get % = margin of profit )
Pre tax margin = Net operating profit = EBIT (earnings before interest and taxes) = Revenue -COGS and other operating costs (rents/utlities)

Question 25

What is COGS?

Answer 25

Costs of Goods Sold
-cost of labor, material and production of goods

Question 26

How do you calculate Gross Operating Profit?

Answer 26

Revenue - COGS

Question 27

How do you calculate Gross Margin?

Answer 27

Shown as a percentage: Gross Operating Profit/Revenue

Question 28

How do you calculate Net Operating Profit?

Answer 28

AKA EBIT (earnings before interest and taxes)
Revenue - COGS and other operating costs (rents/utlities)

Question 29

How do you calculate Pre-tax margin?