M1: Financial Statements

1
M1 Financial Statements

• BS/IS/CFknow accounts that go on each
• Regulatory environment
• Return on Equity/Return on net operating assets
• Assets Liabilities Owners Equity

2
M2 Financial Statements and Transactions

• Balance Sheets Financial statements are
  stratified into sections
• CA/LT Assets
• CL/LT Liabilities Contrib Cap Ret. Earnings
• Operating assets/Financial Investments
• Income Statement Revenues/Expenses
• Revenuesrecognized when earned realizable
• Expensesrecognized when incurred

3
M2 Continued

• Cash Flow Statement
• Cash flow from OperationsIncomenon-cash
  expenses change in current operating assets and
  liabilities
• Cash flow from investingpurchase/sale of
  non-current assets/investments
• Cash flow from financingdebts and stock
• Add beginning cash to get ending cash
• Retained earningsbeginning REincome-dividends
• Know how to work with basic transactions

4
M4 Analyzing Financial Statements

• page 4-11 Key Ratios and Terms
• ROENI/average(OE)
• ROEOperating Return non-operating
  ReturnRNOANOR
• Know difference between
• operating, financial assets
• operating and financial obligations
• Operating Income Revenues-operating expenses
• Take this after tax to get NOPAT
• NOANet Operating AssetsOperating assets
  operating liab.
• RNOANOPAT/NOA
• Find NNEP as residual ROE-RNOA
• LiquidityCR, QR
• SolvencyL/OE or L/TE, Times Interest Earned

5
M5 Operating Income

• Revenuesearned realizable (8 cases p. 5-78)
• Research Development
• US Write-off
• IFRS,
• Expense Research
• Development Capitalize if criteria met
• Restructuringseverance pay, asset write downs
• Income taxesdifferences in timing
• Extraordinary itemsunusual infrequent

6
M6 Operating Assets

• Accounts Receivable after allowance
• of Sales/Aging
• Direct write off method for tax purposes
• Inventoriesfour methods in USA
• FIFO, LIFO, WTD AVE, SPEC ID
• Lower of cost or market
• LIFO not allowed in IFRS
• Fixed assetsdepreciation, SL, DDB