CBA Exam Review Part 3

Transcription

1 CBA Exam Review Part 3 James A. McIntyre, CCE NACM 1

2 What Do Financial Statements Indicate? Liquidity Solvency Management Efficiency 2

3 Financial Statements Balance Sheet (Resource Sheet) Shows the financial position at a point in time Income Statement (Activity Statement) Profit or loss for the accounting period Statement of Retained Earnings Reconciles the change in retained earnings account profits, dividends and adjustments Statement of Cash Flows Separates cash flows into operating activities, investing activities, and financing activities 3

4 Accountant s Opinions Unqualified opinion Unqualified opinion with explanatory language Qualified opinion Disclaimer of opinion Adverse opinion Compilation 4

5 Assets Current Assets: Cash Marketable Securities Receivables Merchandise or Inventory Prepaid Expense Current Assets (total of above) Fixed Assets: Plant, Property and Equipment Less: Accumulated Depreciation Total Net Fixed Assets Long-Term Investments Intangible Assets Miscellaneous Total Assets Balance Sheet Assets = Liabilities + Stockholder s Equity Liabilities Accounts Payable Trade Notes Payable Banks Notes Payable Others Accruals Unearned Revenue Provision for Taxes Current Maturities on Long-Term Liabilities Current Liabilities (total of above) Long-Term Liabilities Deferred Taxes Total Liabilities Stockholders Equity CapitalStock Paid-in Capital Retained Earnings Treasury Stock Total Liabilities and Equity 5

6 Income Statement Gross Sales - returns and allowances = Net Sales -Cost of goods sold = Gross Profit -Expenses Selling General and Administrative = Income from operations + Interest revenue -Expense = Net income before taxes - Provisions for income tax = Net Income 6

7 Statement of Cash Flows Statement consists of three basic parts: Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Change in cash is caused by cash flows generated by or used by operations, investments and financing activities of the company. The sum of these three activities equals the change in the cash on the balance sheet. 7

8 Statement of Cash Flows Inflow/Source Decrease in any asset Increase in any liability Increase in any net worth Outflow/Use Increase in any asset Decrease in any liability Decreasein any net worth 8

9 Common-size Analysis Overview Vertical analysis Horizontal analysis Income Statement Balance Sheet 9

10 CBA Exam Ratio Sheet Revenue Growth/Decline Return on Equity Return on Assets Gross Profit Margin Operating Profit Margin Net Profit Margin Cash Flow Margin (Current Year Sales Prior Year Sales)/ Prior Year Sales Net Income/Equity Net Income /Assets Gross Profit/Net Sales Operating Profit/Net Sales Net Profit/Net Sales Cash Flow from Operating Activities/Net Sales 10

11 CBA Exam Ratio Sheet Earnings Per Share Net Earnings/Average Common Shares Outstanding Total Asset Turnover Total Sales/Total Assets Inventory Turnover Cost of Goods Sold/Inventory Inventory Carrying Period AKA Days Inventory Held or Days Inventory Outstanding Accounts Receivable Carrying Period AKA Days Sales Outstanding or Average Collection Period Inventory/(Cost of Goods Sold/360) Accounts Receivable/(Sales/360) 11

12 CBA Exam Ratio Sheet Accounts Payable Deferral Period AKA Days Payable Outstanding Fixed Asset Turnover Leverage Debt to Equity Debt Ratio Long-term Debt to Total Capitalization Long-term Debt to Net Working Capital Times Interest Earned Accounts Payable/(Cost of Goods Sold/360) Net Sales/Net Property, Plant, Equipment Total Assets/Equity Total Debt/Stockholder s Equity Total Debt/Total Assets Long-term Debt/(Long Term Debt + Stockholders Equity) Long-term Debt/(Current Assets Current Liabilities) Operating Profit/Interest Expense 12

13 CBA Exam Ratio Sheet Working Capital Cash Flow Liquidity Ratio Trade Cycle/Operating Cycle Cash ConversionCycle Current Ratio Quick or Acid-Test Radio Current Assets Current Liabilities (Cash +Marketable Securities + CFOA*)/Current Liabilities (Inventory CarryingPeriod + Accounts Receivable)/Carrying Period (Inventory Carrying Period + Accounts Receivable)/(Carrying Period Accounts Payable Deferral Period) Current Assets/Current Liabilities (Current Assets Inventory)/Current Liabilities * Cash Flow from Operating Activities 13

14 Out of Court Settlement Extension Agreement Composition Agreement Assignment 14

15 Bankruptcy Acts Chapter 13 Wage earner plan/small business Chapter 11 Business reorganization Chapter 7 Straight liquidation Chapter 9 Municipalities and governmental units Chapter 12 Family farm reorganization 15

16 Chapter 7 Liquidation Priorities 1. Secured Creditors 2. Administrative expenses 3. Unsecured claims for sales to a debtor-in-possession 4. Wages & compensation claims 5. Customer deposits 6. Taxes 7. Unfunded pension liability 8. Unsecured creditors 9. Preferred stockholders 10. Common stockholders 16