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Financial Statement Analysis G. Bern ND > Chap 4 > Flashcards

Chap 4 Flashcards

(77 cards)

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1
Q

Revenues - X = Net Income

A

Expenses

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2
Q

X - Expenses = Net Income

A

Revenue

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3
Q

Net Income =

A

Revenue - Expenses

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4
Q

Income Statement is called

A

Statement of Earnings

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5
Q

Statement of ? = Income Statement

A

Earnings

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6
Q

R.O.G.E.L = Net Income

A

Revenue + Other Income + Gains -Expenses -Losses = Net Income

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7
Q

X + Other Income + Gains - Expenses - Losses = Y

A

X=Revenue

Y=Net Income

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8
Q

Revenue + Other Income + Gains - X-Y= Net Income

A 
X = Expenses
Y = Losses
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9
Q

Revenue defined

A

Amounts charged/expected to receive for delivery of goods/services thru ordinary business activities

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10
Q

Amounts charged/expected to receive for delivery of goods/services thru ordinary business activities

A

Revenue

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11
Q

Net Revenue

A

Revenue after adjustments; cash / volume discounts or estimated returns

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12
Q

Revenue after adjustments; cash / volume discounts or estimated returns

A

Net Revenue

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13
Q

Revenue

A

Sales or turnover

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14
Q

Sales vs. Revenue

A

Sale of goods vs. included in Sale of goods but used interchangeably

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15
Q

Expenses

A

Outflows, depletions of assets, incurrences of liabilities

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16
Q

Outflows, depletions of assets, incurrences of liabilities

A

Expenses

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17
Q

Gains and losses are included in

A

Net Income

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18
Q

Gains and losses are

A

economic benefits indirectly related to the core business; sale of land, sale of investment

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19
Q

Gains/Losses calculated by

A

Carrying Value - Price Sold

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20
Q

Income includes both

A

Revenue and gains

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21
Q

Net Income includes

A

Gains and losses

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22
Q

Net Income (Profit or loss) defined

A

(a) income - expenses (b) revenue + other income + gains - expenses - losses

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23
Q

Non-Controlling Interests

A

entities owned by less than 100%

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24
Q

Minority Interest

A

portion of income that belongs to minority shareholders

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25
portion of income that belongs to minority shareholders
Minority Interest
26
entities owned by less than 100%
Non-Controlling Interests
27
Gross Profit
Revenue - Cost of Sales (COGS)
28
MultiStep income statement
Income statement with gross profit subtotals
29
Single Step
Income statement excludes gross profit subtotal
30
IS with no GP subtotal
Single Step
31
IS with GP subtotal
Multi Step
32
Revenue (Sales) - Cost of Sales (COGS)
Gross Profit
33
Operating Profit (Margin)
Revenue - ALL operating expenses
34
Revenue - COGS - SG&A
Operating Profit (Margin)
35
Operating Profit (Margin)
Profits before deducting taxes, interest expense & non-operating expenses
36
Operating Profit = EBIT
NO
37
Gross Profit = Gross Margin
YES
38
Operating Income =
Operating Profit
39
Operating Expense - SGA - RD - Gross Profit =
Operating Profit
40
Operating Profit defined
Reflects company profits on usual business activities before taxes & interest expense
41
EBIT
Earnings before Interest Expense and Taxes
42
Operating Profit = EBIT
YES
43
Revenue Recognition
Idendent of cash receipt/movements
44
Accrual Accounting
Revenue is recognized (reported on income statement) in the period in which it is earned
45
Revenue is recognized (reported on income statement) in the period in which it is earned
Accrual Accounting; Matching Concept
46
Cash received in advance of delivery or service performed =
Unearned Revenue
47
Unearned Revenue
Cash received in advance of delivery or service performed
48
IFRS Revenue Recognition Rule
1. Transfer of significant risks/rewards have been passed to buyer 2. Management involvement, effective control over goods no longer applies 3. Revenue can be measured 4. Economic benefit is likely to occur 5. Costs incurred can be measured
49
IFRS transfer of risks / rewards of ownership occur when
goods are delivered to buyer or legal title is transferred
50
Sales | -Cost of Sales =
Gross Profit
51
Gross Profit | -Operating Expenses =
Operating Profit / Margin
52
US GAAP Revenue Recognition
When revenue is realized or realizable and earned
53
When revenue is realized or realizable and earned
US GAAP Revenue Recognition
54
GAAP Revenue Recognition/Realized
1. Evidence of contract 2. Product has been delivered or service performed 3. Price is determined or determinable 4. Payment is reasonably assurred or collectible
55
Long - Term Contract
Spans a number of accounting periods
56
Percentage of completion method used for
Long Term Contract Revenue Recognition
57
Percentage of completion method
1. Can be measured reliably 2. Est of % complete is reported on income statement 3. Contract costs are expensed revenue 4. Net Income or profit is reported annual as work is performed
58
% of Completion for LT contract
1. When the outcome can be reliably measured | 2. More certainty vs completed contract
59
Completed Contract measure for LT contract
1 When outcome cannot be reliably measured | 2. Less certainty vs. % of completion
60
% Complete Example $5MM BID; Est Cost $4MM YR 1 $3MM Cost incurred Revenue? Cost of Revenue? GP?
Year 1: 75% cost incurred; Revenue =.75 x $5MM = $3.75MM Cost = .75 x $4MM = $3MM Gross Profit = $3.75MM -$3MM = $.75M
61
``` % Complete Example $5MM BID; Est Cost $4MM YR 1: Revenue $3.75MM Cost $3MM Gross Profit $.75M YR 2: $1MM cost incurred Revenue? Cost? GP? ```
Year 2: Revenue = $5MM - $3.75MM = $1.25MM Cost = $1MM Gross Profit = $.25M
62
Error in % complete estimates
If final year:
63
% completion is the preferred method under IFRS, GAAP or Both
Both
64
Completed Contract is allowed under IFRS, GAAP or both
GAAP only
65
Depreciation Methods
1. Straight Line 2. Accelerated 3. Units of Production
66
Straight Line Depreciation
Allocates costs of long lived assets less salvage value evenly across useful life
67
Accelerated Depreciation
Allocates greater portion of expense in first years of asset life Diminishing balance is an example
68
Units of Production Depreciation
Allocation of cost corresponds to actual use of asset in a specific period
69
Judgments needed for Depreciation
1. Salvage Value | 2. Useful Life (IRS determined)
70
Accelerated Depreciation Calculation
1. Determine straight line 2. Determine acceleration factor 3. Dep Rate = Straight line x accel factor 4. Dep Expense = Net Book Value x Dep Rate 5. Discontinue when NBV = Salvage Value
71
Diminshing Balane Dep =
Accelerated Method
72
Depreciation Expense offset
Accumulated Depreciation
73
Depreciation is a cash neg, pos or non cash item
Non Cash Item
74
Nonrecurring items =
1. Discontinued Operations 2 Extraordinary Items 3. Unusual or Infrequent Items .
75
Dicontinued Ops defined
Disposal or stoppage of business line
76
Extraordinary Items defined
1. Not permitted by IFRS 2. Must be reported separately on Income State under GAAP 3. Must be both unusual and infrequent 4. Force Majour " Acts of God"
77
Unusual or Infrequent Items defined
1. IFRS allowed 2. GAAP allowed but can not also be extraordinary 3. Under GAAP must be reported as a part of continuing operations

Financial Statement Analysis G. Bern ND (3 decks)

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