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CFA Level I > 18: Balance Sheet > Flashcards

18: Balance Sheet Flashcards

(83 cards)

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1
Q

Equity equals?

A

The owner’s residual interest in the firm, after deducting liabilities

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2
Q

What are the uses of the balance sheet?

A
  1. asses a firms:
    liquidity
    solvency
    ability to make distributions to shareholders
  2. measure the firm’s capital structure
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3
Q

ability to meet long term obligations

A

solvency

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4
Q

ability to meet short term obligations

A

liquidity

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5
Q

the mix of debt and equity used to finance the firm

A

capital structure of firm

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6
Q

The balance sheet is limited in its ability to determine a company’s _____ value?

A

intrinsic market value

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7
Q

Under IFRS which BS format will be used?

A

liquidity based format
classified

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8
Q

Under GAAP which BS format can be used?

A

Classified

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9
Q

classified balance sheet separately reports _____ vs ______

A

current vs noncurrent assets & liabilities

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10
Q

Classified balance sheet is used to evaluate a firm’s _____?

A

liquidity

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11
Q

A classified balance sheet is used to evaluate a firm’s ____?

A

liquidity

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12
Q

A liquidity based presentation presents ____ & ____ in _____?

A

assets and liabilities in order or liquidity

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13
Q

Which BS presentation format is used by banks?

A

liquidity

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14
Q

Allowance for doubtful accounts is a _____ that _____ the balance of accounts receivable?

A

contra account
reduces

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15
Q

The carrying value of inventories under IFRS is?

A

the lower of:
historical cost
NRV

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16
Q

the carrying value of inventories under GAAP is?

A

the lower of:
historical cost
market cost

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17
Q

Expenses that have been reported but not yet paid

A

accrued expenses (liabilities)

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18
Q

arises when money has been collected for goods or services that has not been delivered

A

Deferred income/unearned revenue

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19
Q

expenses that have been recognized in the income statement, but are not yet due (paid)

A

Accrued liabilities/expenses

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20
Q

current assets and current liabilities occur in 1 year or 1 ______, whichever is less.

A

operating cycle

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21
Q

Working capital= ?

A

current assets - current liabilities

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22
Q

Too much or too little working capital indicates?

A

 Too much= inefficient use of assets
 Too little= liquidity issues

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23
Q

Current assets reveal ____ of the firm?

A

operating activities

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24
Q

non current asset reveal ___ of the firm?

A

investing activities

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25
Non current liabilities reveal ____ of the firm?
long term financing activities
26
financial assets that are traded in a public market and whose value can be readily determined
marketable securities
27
financial asset, that represents amounts owed to the firm by customers for goods and services, sold on credit
Accounts receivable
28
Trade receivables are reported at?
NRV
29
NRV for accounts receivables is the ____ value based on _____
fair value based on estimates of collectibility
30
Measuring inventory costs by assigning predetermined amounts of materials, labor, and overhead to goods produced
Standard costing
31
Measuring inventory costs by measuring inventory at retail prices and then subtract gross profit in order to determine cost
Retail method
32
NRV for inventories includes ____ price & ___ costs
NRV= selling price - completion costs
33
An example of other current assets is?
prepaid expenses
34
What is reported for notes payables?
principal portion of the debt due within 1 year/1operating cycle
35
In the cost model, PPE is reported at ____?
amortized cost
36
Revaluation model is used by _____, when measuring _____ costs.
IFRS; PPE
37
Under GAAP which reporting models for PPE are allowed?
cost model only
38
Under IFRS which reporting models for PPE are allowed?
cost model revaluation model
39
Under GAAP, land is reported at it's _____?
Historical cost
40
= Purchase price + delivery costs + installation costs
historical cost
41
Investment properties are recognized under which accounting principle?
IFRS
42
Under US GAAP, internally created identifiable intangible assets are ?
expensed as incurred, not reported on income statement (internally generated Goodwill)
43
Goodwill is a ____-term asset?
long term asset/noncurrent asset
44
Goodwill = ?
purchase price - fair value of the identifiable net assets (assets-liabilities)
45
Good will should be ____ , but not _____?
tested for impairment, but not amortized
46
For financial assets classified as trading securities, how are unrealized gains and losses reported?
Income statement
47
How does the income statement flow to shareholder's equity?
to shareholders’ equity as part of retained earnings.
48
For financial assets classified as available for sale, how are unrealized gains and losses measured?
on OCI
49
For financial assets classified as held to maturity, how are unrealized gains and losses measured?
They are not measured
50
Held to maturity assets are reported on balance sheet at ?
amortized cost
51
Trading assets are reported on balance sheet at?
fair value
52
available for sale assets are reported on balance sheet at?
fair value
53
The interest and dividends from trading securities are reported where?
income statement
54
Deferred tax liabilities are a ______?
non current liability
55
How are financial long term liabilities measured, when not issued at face value?
Reported at amortized cost
56
How are held for trading liabilities, derivate liabilities, non-derivative liabilities with exposures hedged by derivates measured?
Fair value
57
non-controlling (minority) interest in consolidated subsidiaries is presented on the balance sheet _____?
Separately, but a part of shareholder's equity
58
The item “retained earnings” is a component of
Shareholder's equity
59
Treasury stock is reported as a ______ to ____ on the ______ .
reduction to shareholder's equity on the balance sheet
60
Treasury stock = ?
issued shares - outstanding shares
61
Shares that have been repurchased and not cancelled by the company that issued them
Treasury stock
62
portion in consolidated subsidiaries that is owned by others, i.e., shares in subsidiaries not owned by the parent
Non-controlling interest
63
cumulative amount of earnings recognized on a company’s income statements that have not been distributed as dividends to the company’s owners
retained earnings
64
Equity interest of of minority shareholders in subsidiaries that have been consolidated
non-controlling interest
65
Vertical common-size analysis involves stating each balance sheet item as a percentage of total ____?
assets
66
Common size balance sheet provides information on the company's ______?
increase or decrease of financial leverage
67
determines how much of a company’s near-term obligations can be settled with existing amounts of cash and marketable securities
cash ratio
68
An investor worried about a company’s long-term solvency would most likely examine its
debt to equity ratio
69
Under GAAP, Equipment is measured at?
Historical Cost= Historical cost - accumulated depreciation
70
Trading securities BS: Income Statement
BS: fair value Income Statement: -unrealized gains and losses -realized gains and losses -interest & dividends
71
Held to maturity BS: Income Statement
BS: amortized cost Income Statement: -realized gains/losses -interest
72
Available for sale BS: Income Statement:
BS: -fair value -unrealized gains/losses (OCI- part of stockholder's equity) Income Statement: -realized gains/losses -interest -dividends
73
A company that reports under IFRS has developed a new product which required research costs of $2 million and development costs of $4 million. The maximum amount the company can record as the value of the new product on its balance sheet is?
4 million= 6 million total - 2 million research costs incurred _____________________________________` 6million total cost 2 million in research (must be expensed as incurred) 4 million in development (capitalized)
74
Declaring a dividend _____ shareholders' equity
decreases
75
Under IFRS, firms may report an investment in the equity securities at fair value through?
Income statement or OCI GAAP says only income statement
76
Identifiable, intangible assets are measured at?
amortized over their useful lives
77
The statement of changes in equity shows a firm's _______________ and ________.
-comprehensive income (net income and other comprehensive income) -transactions with shareholders, such as dividends paid and issuance or repurchases of stock
78
The amount the corporation receives from the issuance of common stock is equal to ?
par value + the additional paid-in-capital (proceeds in excess of par)
79
stated or nominal value assigned to the common stock
The par value of common stock
80
What are the two models for measuring PPE?
cost model revaluation
81
measure the firm’s ability to satisfy long-term obligations
solvency ratios
82
Measures liquidity relative to current liabilities
Liquidity ratios
83
Held for trading (trading securities): are expected to be sold ______, Unrealized gains/losses are reflected how?
expected to be sold in the near term therefore, their unrealized gains and losses are reported on the income statement and flow to shareholder's equity as part of RE

CFA Level I (45 decks)

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