Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFA Level 1 Formulas > Financial Reporting & Analysis (13-17%) > Flashcards

Financial Reporting & Analysis (13-17%) Flashcards

1
Q

(2 Versions) What are the Accounting Equations?

A

Assets = Liabilities + Owners’ Equity

or

Assets = Liabilities + Contributed Capital + Beginning Retained Earnings + Revenues – Expenses - Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Basic Earnings Per Share

A

Basic EPS=(𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒−𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠) ÷ 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Capital Lease

A

Capital Lease; Lessee reports asset and loan on B/S; All risks and benefits of property are transferred to lessee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Cash Conversion Cycle

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Cash Ratio

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Current Ratio

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Days of inventory on hand

A

Days of inventory on hand = Number of days in period ÷ Inventory turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Days of sales outstanding

A

Days of sales outstanding = Number of days in period ÷ Receivables turnover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Debt to Assets

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Debt to Equity

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Defensive Interval Ratio

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Deferred Tax Asset (DTA)

A

Arise when excess amount paid for income taxes (taxable income > pre-tax income) 𝐷𝑇𝐴=(𝑇𝑎𝑥 𝐵𝑎𝑠𝑒−𝐶𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐴𝑚𝑜𝑢𝑛𝑡)×𝑇𝑎𝑥 𝑅𝑎𝑡𝑒

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Deferred Tax Liabilities (DTL)

A

Appear when a deficit amount exists for income tax payment (taxable income < pre-tax income) 𝐷𝑇𝐿=(𝐶𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐴𝑚𝑜𝑢𝑛𝑡−𝑇𝑎𝑥 𝐵𝑎𝑠𝑒)×𝑇𝑎𝑥 𝑅𝑎𝑡𝑒

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Diluted Earnings Per Share

A

𝐷𝑖𝑙𝑢𝑡𝑒𝑑 𝐸𝑃𝑆=𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 ÷ (𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 + 𝑁𝑒𝑤 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆ℎ𝑎𝑟𝑒𝑠 𝐼𝑠𝑠𝑢𝑒𝑑 𝑎𝑡 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Direct Method (Cash Flow)

A

Direct Method: disclose cash inflows by source and cash outflows by use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Double-Declining Depreciation

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Effective Tax Rate

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Financial Asset Measurement

A

Held-for-trading: measured at fair value on B/S, Dividends/Interest and Unrealized/Realized PnL on I/S
Available-for-sale: measured at fair value on B/S; realized PnL I/S; unrealized PnL OCI
Held-to-maturity: Amortized cost on B/S; Coupons/Dividends through I/S; realized Pnl I/S

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Financial Leverage

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Five-Step Revenue Recognition Model

A
  1. Identify the contract(s) with a customer
  2. Identify the separate or distinct performance obligations in the contract
  3. Allocate the transaction price to the performance obligations in the contract
  4. Recognize revenue when (or as) the entity satisfies a performance obligation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Fixed asset turnover

A

Fixed asset turnover = Revenue ÷ Average net fixed assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Fixed Charge Coverage

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Free Cash Flow to Equity (FCFE)

A
  1. 𝐹𝐶𝐹𝐸 = 𝐶𝐹𝑂 – 𝐹𝐶𝐼𝑛𝑣 + 𝑁𝑒𝑡 𝑏𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔
  2. 𝐹𝐶𝐹𝐸 = 𝑁𝐼 + 𝑁𝐶𝐶 – 𝐶𝑎𝑝𝐸𝑥 – 𝛥𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑁𝑒𝑡 𝐵𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Free Cash Flow to the Firm (FCFF)

A
  1. 𝐹𝐶𝐹𝐹=NI + NCC + Int(1 – Tax rate)– FCInv – WCInv
  2. 𝐹𝐶𝐹𝐹 = CFO + Int(1 – Tax rate)– FCInv
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

IFRS

A

IFRS
Interest Received: Operating or Investing
Interest Paid: Operating or Financing
Dividends Received: Operating or Investing
Dividends Paid: Operating or Financing

26
Q

Income Tax Expense

A
27
Q

Indirect Method (Cash Flow)

A

Indirect Method: reconcile change in cash from net income with non-cash items and net changes in working capital

28
Q

Interest Coverage

A
29
Q

Inventory turnover

A

Inventory turnover= Cost of sales or cost of goods sold ÷ Average inventory

30
Q

LIFO VS FIFO (FIFO)

A

LIFO is only allowed under US GAAP
Under a period of rising prices and stable or increasing inventory:

  • FIFO leads to:
  • Lower COGS
  • Higher Gross Profit
  • Higher Ending Inventory
  • Lower CFO higher relative taxes
31
Q

LIFO VS FIFO (LIFO)

A

LIFO is only allowed under US GAAP
Under a period of rising prices and stable or increasing inventory:

  • LIFO leads to:
  • Higher COGS
  • Lower Gross Profit
  • Lower Ending Inventory
  • Higher CFO from tax savings
32
Q

Number of days of payables

A

Number of days of payables = Number of days in period ÷ Payables turnover

33
Q

Operating Lease

A

Operating Lease; Lessee reports lease payments; No B/S recognition; All risks and ownership remain with lessor

34
Q

Payables turnover

A

Payables turnover = Purchases ÷ Average trade payables

35
Q

Pension Plans

A
  1. Defined Contribution Plan: Amount of contribution is expensed.
  2. Defined Benefit Plan: Contributions also expensed. Underfunded/Overfunded status appears on B/S as an A or L.
36
Q

Quick Ratio

A
37
Q

Receivables Turnover

A

Receivables Turnover = Revenue ÷ Average receivables

38
Q

Revenue Recognition Principles

A

Requirements: 1) Risk and reward of ownership is transferred 2) Collectability is probable

39
Q

Straight-Line Depreciation

A
40
Q

Total asset turnover

A

Total asset turnover = Revenue ÷ Average total assets

41
Q

Units of Production Depreciation

A
42
Q

US GAAP

A

US GAAP
Interest Received: Operating
Interest Paid: Operating
Dividends Received: Operating
Dividends Paid: Financing

43
Q

Weighted Average Cost per Unit

A

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝑠𝑎𝑙𝑒 ÷ 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝑠𝑎𝑙𝑒

44
Q

Cost of Goods Sold (FIFO/LIFO)

A

𝐶𝑂𝐺𝑆 = 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦+𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠−𝐸𝑛𝑑𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

45
Q

LIFO to FIFO Conversion

A
  1. 𝐹𝐼𝐹𝑂 𝐶𝑂𝐺𝑆=𝐿𝐼𝐹𝑂 𝐶𝑂𝐺𝑆−(𝐸𝑛𝑑𝑖𝑛𝑔 𝐿𝐼𝐹𝑂 𝑟𝑒𝑠𝑒𝑟𝑣𝑒−𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐿𝐼𝐹𝑂 𝑟𝑒𝑠𝑒𝑟𝑣𝑒)
  2. 𝐹𝐼𝐹𝑂 𝐸𝑛𝑑𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦=𝐿𝐼𝐹𝑂 𝐸𝑛𝑑𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦+𝐿𝐼𝐹𝑂 𝑟𝑒𝑠𝑒𝑟𝑣𝑒
  3. 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒(𝐹𝐼𝐹𝑂)=𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒(𝐿𝐼𝐹𝑂)+(𝐸𝑛𝑑𝑖𝑛𝑔 𝐿𝐼𝐹𝑂 𝑟𝑒𝑠𝑒𝑟𝑣𝑒−𝐵𝑒𝑔𝑖𝑛𝑖𝑛𝑔 𝐿𝐼𝐹𝑂 𝑟𝑒𝑠𝑒𝑟𝑣𝑒)×(1−𝑡𝑎𝑥 𝑟𝑎𝑡𝑒)
  4. LIFO liquidation occurs when older LIFO inventory is sold (Ending LIFO reserve < Beginning LIFO reserve)
46
Q

Inventory Measure (IFRS & GAAP)

A
  1. IFRS: Lower of Cost and Net Realisable Value (NRV)
  2. US GAAP: Lower of Cost, Market Value or Net Realisable Value (NRV)
  3. 𝑁𝑅𝑉=𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑠𝑎𝑙𝑒𝑠 𝑝𝑟𝑖𝑐𝑒−𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑐𝑜𝑠𝑡𝑠−𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝑐𝑜𝑠𝑡𝑠
47
Q

Revaluation of Long-Lived Assets

A
  1. US GAAP: Revaluation Prohibited
  2. IFRS: Revaluation recognized in net income to the point it reverses previous impairment losses; additional gains go into revaluation surplus
48
Q

Capitalizing vs. Expensing

A
  1. Capitalizing: smooths net income impact; higher ROE and ROA initially; lower ROE and ROA later on;
  2. Expensing: short-term net income decline; lower ROE and ROA initially; higher ROE and ROA later on;
49
Q

Deferred Tax Asset (DTA)

A

Arise when excess amount paid for income taxes (taxable income > pre-tax income) 𝐷𝑇𝐴=(𝑇𝑎𝑥 𝐵𝑎𝑠𝑒−𝐶𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐴𝑚𝑜𝑢𝑛𝑡)×𝑇𝑎𝑥 𝑅𝑎𝑡𝑒

50
Q

Deferred Tax Liabilities (DTL)

A

Appear when a deficit amount exists for income tax payment (taxable income < pre-tax income) 𝐷𝑇𝐿=(𝐶𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐴𝑚𝑜𝑢𝑛𝑡−𝑇𝑎𝑥 𝐵𝑎𝑠𝑒)×𝑇𝑎𝑥 𝑅𝑎𝑡𝑒

51
Q

Gross Profit Margin

A

𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛=𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 ÷ 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

52
Q

Net Profit Margin

A

𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛=𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 ÷ 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

53
Q

Operating Profit Margin

A

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛=𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒 ÷ 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

54
Q

Return on Assets

A

ROA=𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

55
Q

Return on Equity

A

ROE= 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 ÷ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦

56
Q

Du Pont Analysis (Traditional)

A
57
Q

Du Pont Analysis (Extended)

A
58
Q

Dividend Payout Ratio

A

Dividends payout ratio = Common share dividends ÷ Net income attributable to common shares

59
Q

Retention Rate

A

Retention rate= (Net income attributable to common shares –Common share dividends) ÷Net income attributable to common shares

60
Q

Sustainable Growth Rate

A

Sustainable growth rate (g) =𝑏 × ROE

CFA Level 1 Formulas (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions