FAR High Yield

Question 1

BEPS vs. DEPS formulas?

Answer 1

BEPS = (NI – Pref Div) ÷ WACSO; DEPS adds after-tax bond interest to NI and converted shares to WACSO.

Question 2

OWNES mnemonic for finance lease classification?

Answer 2

Ownership, Written option, NPV ≥ 90%, Economic life ≥ 75%, Specialized asset.

Question 3

IPAC mnemonic for finance lease JE?

Answer 3

Interest, Principal, Amortization, Cash (split finance lease entries accordingly).

Question 4

LEC LL AA mnemonic for operating lease JE?

Answer 4

Lease Exp, Cash; Lease Liability, Accumulated Amortization ROU.

Question 5

Bond discount vs. premium logic?

Answer 5

Discount = Market > Stated (loss); Premium = Market < Stated (gain).

Question 6

Journal entry for noninterest-bearing bond?

Answer 6

Dr Interest Expense / Cr Discount on Bonds.

Question 7

CECL Step 1 formula for Expected Credit Loss (ECL)?

Answer 7

ECL = Amortized Cost – Present Value of Future Cash Flows.

Question 8

CECL Treatment: FV > AC?

Answer 8

Record unrealized gain to OCI.

Question 9

CECL Treatment: FV < AC?

Answer 9

Loss ≤ ECL → NI; Excess loss → OCI.

Question 10

Current and Quick Ratio formulas?

Answer 10

Current = CA ÷ CL; Quick = (Cash + AR + ST MS) ÷ CL.

Question 11

Turnover ratio shortcut?

Answer 11

JE side ÷ average of the other side (e.g., Sales ÷ Avg AR).

Question 12

Days in X formula?

Answer 12

Ending Balance ÷ (Activity ÷ 365).

Question 13

Cash Conversion Cycle (PIA)?

Answer 13

Days AR + Days Inv – Days Payables = PIA

Question 14

Solvency ratios?

Answer 14

D/E, Debt/TA, EqMult = TA/TE, TIE = EBIT ÷ Interest.

Question 15

Accrual vs. Cash conversion rules?

Answer 15

Cash→Accrual: A Link / L Invert; Accr→Cash: A Invert / L Link.

Question 16

Profitability and DuPont breakdown?

Answer 16

DuPont = PM × ROA OCF = CFO ÷ CL.

Question 17

EBITDA and P/E definitions?

Answer 17

EBITDA = NI + Tax + Int + D&A; P/E = Price ÷ EPS.

Question 18

Bank Rec: Adjustments to bank vs. book?

Answer 18

Bank: +DIT, –OC; Book: +Collections, +Int, –NSF, –Svc charges.

Question 19

Inventory valuation rules?

Answer 19

FIFO/WA = Lower of Cost or NRV; LIFO = Lower of Cost or Market (NRV, RC, Floor).

Question 20

GRaSPP vs SE CIPPOE & NFP donations?

Answer 20

GRaSPP = Modified Accrual; SE/CIPPOE = Full Accrual; Donated Services = Skilled + Needed.