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44 Cards in this Set
- Front
- Back
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Define asset
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Economic resources to generate revenue and ultimately a profit
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What CF does dividends paid go into?
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CFF
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What CF does the acq/div business unit go into?
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CFI
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What CF does gain/sale trading securites go into?
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CFO
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What is the difference between 10-K & 10-Q?
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10-K: Annual, official ; 10-Q: Quarterly, not-audited
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What is proxy statement?
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Qualitative, exec compensation, stock price trends, board of directors
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What are the 3 buckets of cash bonuses?
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Income statement measures, returns, cash flows
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What is a material deficiency?
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A material weakness in internal controls that creates -more of a remote chance- that a material misstatement will not be prevented or detected
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What is a deferred expense?
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Asset allocated over multiple periods, ex. prepaid rent
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What is an accrued expense?
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Expense incurred, not paid for, ex. wage expense
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What is a deferred revenue?
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Previously recorded liabilities adjusted for revenue earned, ex. unearned revenue
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What is an accrued revenue?
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Previously unrecorded revenue adjusted for revenue earned, ex. interest receivable, unbilled A/R
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What 4 factors influence sales?
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Volume, price, product mix, foreign exchange, (also acq)
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How to qualify special charges? Examples?
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Unusual or infrequent. Restructuring, gains/losses on asset sales, write-down/write-off.
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How to qualify extraordinary items? Examples?
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Unusual AND infrequent. Floods, quakes, expenses from new laws, special theft.
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Completed contract method. Advantages? Disadvantages?
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Adv: Don't pay taxes till the end. Dis: Might be in higher tax bracket later
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Describe Disney & CapCities ABC
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Disney acquired for $18b of goodwill
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Percentage of completion: Journal entry to record costs incurred
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Dr. Inventory: Construction in progress
Cr. Cash |
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Percentage of completion: Journal entry to record income
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Dr. Inventory: Construction in progress
Cr. Income from continuing operations |
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Percentage of completion: Journal entry to record billings
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Dr. Accounts receivable
Cr. Billings on construction in progress |
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Percentage of completion: Journal entry to terminate contract
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Dr. Billings on construction in progress
Cr. Inventory: Construction in progress |
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How do you record the buying back of treasury stock (2 ways)?
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1. Treasury stock acct.
2. Reduce contributed capital |
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How do you calculate cost of capital?
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Firm's weighted average of cost of debt & cost of equity (= to % amt of debt * cost of debt)
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How do you calculate diluted EPS?
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(NI - Pref. Div + Tax effects) / (Weighted Outstanding Shares + Pot. Dilutive Securities)
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What are the five key drivers of financial results?
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Profit margin, Asset turnover, Debt to Equity, Cash Flow Yield, Turnover Ratios
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How does percentage of net sales method work?
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Calculate a % to go from NET SALES to UNCOLLECTIBLE ACCTS EXPENSE.
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How does aging of accounts receivable work?
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Calculate a % to go from ACCTS RECEIVABLE to TARGETED BALANCE OF UNCOLLECTIBLE ACCTS
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What factors influence the estimate of percentage uncollectible?
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Credit quality of customers, economic conditions, industry boom/busts, change in current policy (Lucent), earnings mgmt, prior period estimates
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Detail journal entry for obsolescence.
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Dr. Loss due to inventory revaluation
Cr. Allowance for inventory revaluation |
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What is the REALISTIC inventory turnover equation?
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LIFO COGS + LIFO Dipping Gain / FIFO Avg Inventory
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How do you calculate estimated average life?
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Avg. Depreciable Assets / Dep Exp
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What are good income quality estimates?
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Fast depreciation, short useful life, minimal residual value, short amortization, high uncollectible estimate, LIFO
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What are the four types of "Other comprehensive income" items?
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1. Unrealized GL on "Available for sale" securities
2. Unrealized currency translation GL 3. Losses related to minimum pension obligations 4. Unrealized GL related to hedging |
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How are bonds carried?
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At amortized cost.
At issuance: market value Later on: book/carry value = FV +- premium/discount |
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Why issue convertible bonds?
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1. Investors like them-- can offer lower interest rates
2. Bondholders have no voting rights; no control seded 3. Bond interest is tax deductible |
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Journal entry for bond conversion into common stock
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Dr. Bonds Payable 100k
Dr. Unamortized Bond Premium 1447 Cr. Common Stock (par) 32k Cr. PIC in Excess of Par (plug) |
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What are the four hedge accounting considerations?
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1. Hedged Item
2. Hedging Instrument 3. Hedging Risk 4. Hedge Effectiveness |
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How do you define hedge effectiveness? What is the diff. of effective & non-effective hedge?
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Effectiveness: Within 80% to 125%. Effective hedge goes to Other Comprehensive Income; Ineffective hedge goes to earnings
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What are the three types of hedges?
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Fair value hedge, Cash flow hedge, Foreign currency hedge
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What are the FOUR capital lease criteria?
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1. Lease transfers ownership of the asset by end of lease term
2. Discount guarantee for sale 3. Lease term is 75% or more of useful life 4. PV of payments at least 90% of fair value |
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How does operating lease affect:
a) Debt-to-equity b) RoA c) Current ratio |
a) Lower D/E in operating
b) Higher ROA in operating c) Higher current ratio in operating |
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Where do LESSEE capital & operating payments flow in CFS?
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Capital lease payments:
Interest - operating cf Principal - financing cf Operating lease payments: Expense - operating cf |
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In evaluating capital/operating leases, how do you estimate the income statement effect?
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Make adjustments to see the change in retained earnings over two years. That is the income effect!
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Lessor accounting: Direct financing vs Operating leases. How do they affect income?
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In operating leases, the asset stays on the books.
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