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CFA Level 1 > Financial Reporting & Analysis > Flashcards

Financial Reporting & Analysis Flashcards

1
Q

Amount at which an asset or liability is valued for tax purposes

A

Tax Base

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2
Q

Amount at which an asset or liability is valued according to accounting principles

A

Carry Amount

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3
Q

Asset Turnover

A

(Revenue/Average Assets) Measures the efficiency of a company’s assets in generating revenue or sales

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4
Q

EBITDA Margin

A

(EBITDA/Revenue) Measures a company’s operating profit, shown as a percentage of its revenue

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5
Q

EBIT Margin

A

(EBIT/Revenue) Measures the operating earnings over operating sales

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6
Q

EBITDA Multiple

A

(Enterprise Value/EBITDA) compares a company’s Enterprise Value to its annual EBITDA (which can be either a historical figure or a forecast/estimate). This multiple is used to determine the value of a company and compare it to the value of other, similar businesses.

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7
Q

Return on Common Equity

A

is a financial ratio that shows how well a company is managing the capital that common shareholders have invested in it.
(Net income - Preferred dividends)/Common Equity

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8
Q

Impairment

A

an unanticipated decline in the value of an asset, only occurs when carrying value > fair value

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9
Q

Intangible Assets

A

identifiable, non-monetary assets without physical substance

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10
Q

Operating Activity

A

Day to day business activity

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11
Q

Investing Activity

A

acquisition/disposal of non-current assets

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12
Q

Financing activities

A

obtaining/repaying capital

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13
Q

Assets

A

Economic resources (current and non-current)
Accounts: Cash, Inventory, Accts Receivables
Contra-Accounts: Depreciation
Equation:
= Liabilities + contributed capital + statement of retained earnings (aka. ending retained earnings)

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14
Q

Liabilities

A

creditor’s claim on resources (current and non-current)

Accounts: Accts Payable, Accrued Expenses

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15
Q

Equity

A

residual claim on resources
=Contributed Capital + Retained Earnings
Accounts: Paid-in-capital, retained earnings

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16
Q

Revenues

A

inflow of economic resources
Accounts: Sales
Contra-Accounts: Returns & Allowances

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17
Q

Expenses

A

outflow of economic resources

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18
Q

Basic Accounting Equation

A

Assets = Liability + Equity

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19
Q

Residual Claim

A

Owners equity, shareholder equity, net assets, net worth, net book value

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20
Q

Ending Retained Earnings equation

A

= beginning retained earnings + net income - dividends

= beg. retained earnings + Revenue - Expenses - Dividends

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21
Q

Double Entry Accounting

A

every transaction affects at least 2 accounts such that debits = credits

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22
Q

Unearned Revenue

A

(liability) get paid before delivery of goods/service

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23
Q

Accrued Revenue

A

(asset) not yet billed

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24
Q

Prepaid Expense

A

(asset) paid for but not yet used

25
Q

Accrued Expense

A

(liability) incurred but not yet billed

26
Q

Historical Cost

A

All transactions are recorded at

27
Q

Adjustments

A

reflect items not reported
reconcile IFRS/GAAP
reconcile accounting policies

28
Q

Primary purpose of financial reports

A

provide information and data about a company
to see financial position
to see performance (profitability & cash flows)

29
Q

Statement of financial position

A

balance sheet (point in time)

30
Q

Income statement

A

(over a period of time)
-single statement

Revenue + other income (typically gains)
- (expenses + losses)
= Net income

31
Q

Statement of comprehensive income

A

all items that change owners equity (except transactions with owners)

32
Q

Statement of changes in equity

A

reconciles beginning balances with ending balances

33
Q

statement of cash flows

A

operating
investing
financing

34
Q

Notes to the financial statements

A

methods, estimates, assumptions

35
Q

MD & A

A

not audited, additional information

36
Q

Audit

A

annual statement only
opinion on
- fair presentation
- internal controls

37
Q

Unqualified opinion

A

best or highest opinion

38
Q

Qualified opinion

A

everything is fine except for a little thing

39
Q

Adverse opinion

A

do not like what we see

40
Q

Disclaimer of Opinion

A

cannot make opinion (not bad but nothing there)

41
Q

Financial Statement Analysis Framework

A
  1. purpose
  2. collect data
  3. process data
  4. analyze/ interpret
  5. communicate conclusions
  6. follow up
42
Q

Diluted EPS

A

Net Income - Preferred Share Dividend (PSD)

PSD = (P.S+ # of convertible shares) / (Weighted average common shares + new shares after preferred x conversion rate

43
Q

intangible assets

A

non current asset which is identifiable, non-monetary assets without physical substance (copyright, patent, licenses, trademark)

IFRS: cost model (cost - amortization - impairment (definite life only) or revaluation

GAAP: cost model (cost - amortization - impairment (definite life only)
(indefinite life - tested annually for life or impairment)

internal developed intangible assets typically not recognized on balance sheet where costs during research are expensed and costs during development are capitalized

if acquired capitalize on Balance sheet at cost

44
Q

Capitlized

A

is to record a cost or expense on the balance sheet for the purposes of delaying full recognition of the expense.

45
Q

Goodwill

A

excess over fair value of acquiring another company

purchase price is allocated to FV of all A and L

46
Q

EBITDAR

A

Earnings before interest taxes depreciation amortization rental payments

47
Q

interest paid on a lease

A

IFRS: operating, investing, financing
GAAP: operating

48
Q

Current Ratio

A

current assets/ current liabilities

current assets: cash, marketable securities (<1yr), accts receivables, inventory, prepaid expenses

current liabilities: accts payable, current portion of LTD, line of credit

49
Q

Current Ratio

A

current assets/ current liabilities

current assets: cash, marketable securities (<1yr), accts receivables, inventory, prepaid expenses

current liabilities: accts payable, current portion of LTD, line of credit, accrued liabilites

50
Q

Interest or Dividends Recieved

A

IFRS: Operating or investing
GAAP: Operating

51
Q

Current Ratio

A

current assets/ current liabilities

current assets: cash, marketable securities (<1yr), accts receivables, inventory, prepaid expenses

current liabilities: accts payable, current portion of LTD, line of credit, accrued liabilities

52
Q

Interest or Dividends Recieved

A

IFRS: Operating or investing
GAAP: Operating

53
Q

COGS

A

Beg Inventory + purchases - ending inventory

54
Q

Purchases

A

Ending Inventory + COGS - Beginning Inventory

55
Q

Purchases

A

Ending Inventory + COGS - Beginning Inventory

56
Q

Beginning Inventory

A

Ending Inventory + COGS - Purchases

57
Q

Ending Inventory

A

Beginning Inventory + Purchases - COGS

58
Q

Income Statement

A

presents financial results over a period of time

59
Q

Multi step income statement

A 
Rev - COGS = gross profit
Gross profit - operating expense = EBIT
operating profit (or EBIT) - interest = EBT
EBT - taxes = net income

CFA Level 1 (1 decks)

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