lOMoARcPSD|5970785
Financial Statement Analysis - Summary
Table of Contents
LECTURE 1 ............................................................................................................................................ 2
CHAPTER 2 – INTRODUCTION TO FINANCIAL STATEMENTS AND BOOKKEEPING ..................................... 3
CHAPTER 3 – ACCRUAL-BASED VERSUS CASH-FLOW-BASED PERFORMANCE MEASURES ......................... 4
CASE 3.1 SOLUTION ................................................................................................................................................ 6
CHAPTER 4 – ANALYTICAL INCOME STATEMENT ................................................................................... 7
CHAPTER 5 – PROFITABILITY ANALYSIS .............................................................................................. 10
PRE-RECORDED VIDEO – EVA.......................................................................................................................... 20
CHAPTER 6 – GROWTH ANALYSIS ........................................................................................................ 23
CASE 6.1 GROWTH SOLUTION................................................................................................................................. 32
CHAPTER 7 – LIQUIDITY RISK ANALYSIS .............................................................................................. 35
CHAPTER 8 – FORECASTING ................................................................................................................ 46
FORECASTING TEMPLATE ........................................................................................................................................ 58
CHAPTER 9 – VALUATION .................................................................................................................... 58
CHAPTER 10 – COST OF CAPITAL ......................................................................................................... 79
CHAPTER 11 – CORPORATE CREDIT ANALYSIS .................................................................................... 89
CHAPTER 11 – CREDIT ANALYSIS ..................................................................................................................... 91
CHAPTER 12 - EVALUATING AND REWARDING MANAGEMENT’S PERFORMANCE .................................. 95
BOCONCEPT – ACCOUNTING BASED BONUS PLAN..................................................................................................... 102
CHAPTER 13 - ACCOUNTING QUALITY ............................................................................................... 106
CASE 13.1 SOLUTION .......................................................................................................................................... 113
CHAPTER 14 - ACCOUNTING FLEXIBILITY IN THE INCOME STATEMENT ............................................. 114
CHAPTER 14 – NOTES FROM PRE-RECORDED VIDEO....................................................................................... 124
CHAPTER 16 – ACCOUNTING FLEXIBILITY AND CONSEQUENCES FOR USERS ....................................... 124
CHAPTER 17 – ADJUSTMENTS TO IMPROVE ACCOUNTING QUALITY (PRE-RECORDED) ....................... 138
CASE 17.1 ACCOUNTING QUALITY......................................................................................................................... 148
CASE 17.2 ACCOUNTING QUALITY......................................................................................................................... 150
MULTIPLE CHOICE 2019 .................................................................................................................... 154
MULTIPLE CHOICE OCTOBER 2020 .................................................................................................... 162
MULTIPLE CHOICE RE-TAKE 2020 ..................................................................................................... 172
EXAM JANUARY 2009 ........................................................................................................................ 183
EXAM MARCH 2009 ........................................................................................................................... 192
EXAM JANUARY 2010 ........................................................................................................................ 198
EXAM JANUARY 2011 ........................................................................................................................ 206
EXAM MARCH 2011 ........................................................................................................................... 218
EXAM MARCH 2010 ........................................................................................................................... 227
EXAM JANUARY 2012 ........................................................................................................................ 235
EXAM MARCH 2012 ........................................................................................................................... 246
EXAM JANUARY 2013 ............................................................................................................................ 1
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EXAM MARCH 2013 ............................................................................................................................... 7
EXAM JANUARY 2014 .......................................................................................................................... 15
EXAM MARCH 2014 ............................................................................................................................. 26
EXAM JANUARY 2015 .......................................................................................................................... 42
EXAM JANUARY 10. 2015.......................................................................................................................... 52
EXAM JANUARY 2016 .......................................................................................................................... 65
EXAM JANUARY 2017 .......................................................................................................................... 72
EXAM FEBRUARY 2017 ........................................................................................................................ 81
EXAM JANUARY 2018 .......................................................................................................................... 89
EXAM MARCH 2018 ........................................................................................................................... 100
EXAM JANUARY 2020 ........................................................................................................................ 112
EXAM FEBRUARY 2019 ...................................................................................................................... 122
EXAM JANUARY 2019 – RETAKE ........................................................................................................ 133
EXAM JANUARY 2021 ........................................................................................................................ 135
RANDOM EXAM ................................................................................................................................. 146
Lecture 1
3-leg monster:
1. Equity oriented stakeholders (investors, firms, corporate finance analysts)
2. Debt-capital-oriented stakeholders (Banks, mortgage-credit analysts etc)
3. Performance-oriented stakeholders (management, the board, investors)
Purpose of the analysis determines which decision model to apply. The decision model determines
which types of information are requested and which financial ratios are used in the financial
statement analysis.
Cash flow valuation are not very cost-efficient because they require forecasting (time consuming)
2
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Price multiples are cost efficient because they are easier to calculate
Asset-based-approach (net asset value (NAV)) Etc.
Chapter 2 – Introduction to financial statements and bookkeeping
A company must provide an annual report as well as potential supplementary reports
- Must supply a statement of changes in owner’s equity
Key elements of financial statements:
- Income statement and statement of comprehensive income
- Balance sheet
- Cash flow statement
- Statement of changes in owner’s equity
Revenues
-Expenses
=Earnings for the period
Financial statement users want to know:
- Which revenues and expenses are recognized (Recognition criteria)
- When are revenues and expenses recognized (Recognition criteria)
- How are revenues and expenses measured? (Measurement attributes)
- How are revenues and expenses presented? (Classification issues)
An income statement shall as a minimum include:
- Revenues
- Finance costs
- Share of the profit or loss associated and joint ventures accounted for using the equity
method
- Post tax profit or loss of discontinued operations
- Tax expenses
Examples of items that might need to be included:
- Write-downs
- Restructuring of activities
- Disposals of items, property, plant and equipment
A company shall present an analysis of expenses, classifying them either by nature or function
3
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Nature: Raw materials, staff, costs, depreciation etc.
Function: Cost of goods sold, distribution costs, administrative expenses.
Statement of comprehensive income presents all income and expense items, whether or not these
are recognized in the income statement.
Statement of changes in owner’s equity
- Reconciles equity at the beginning of the period with equity at the end of the period
Significant items
- Retained earnings (accumulation of profit (and losses) over time, not of dividends)
- Revaluing property (to fair value) –“Revaluation services”
- Currency translations
- Matters that are not part of the operations, but sadly between shareholders such as
repurchase of shares and increase in share capital.
Double-bookkeeping or double-entry bookkeeping
- Total amounts of credit must equal the amounts of debits for each transaction
Chapter 3 – Accrual-based versus cash-flow-based performance measures
Accrual-based performance measures: EBIT and net earnings
- Arguments against: historically oriented and easily manipulated.
FASB sees the accrual income statements as superior to the net cash flow statement for measuring a
company’s value creation (earnings capacity) within a given period
Unused purchases at the end of the period are recognized as inventory in accrual-based accounting
Differences between accrual-based accounting and cash flows are made up in net working capital.
- Cash flow accounting is more prudent because it does not take a sale into account before
cash is received.
Measuring earnings capacity
4
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Financial Statement Analysis - Summary
Table of Contents
LECTURE 1 ............................................................................................................................................ 2
CHAPTER 2 – INTRODUCTION TO FINANCIAL STATEMENTS AND BOOKKEEPING ..................................... 3
CHAPTER 3 – ACCRUAL-BASED VERSUS CASH-FLOW-BASED PERFORMANCE MEASURES ......................... 4
CASE 3.1 SOLUTION ................................................................................................................................................ 6
CHAPTER 4 – ANALYTICAL INCOME STATEMENT ................................................................................... 7
CHAPTER 5 – PROFITABILITY ANALYSIS .............................................................................................. 10
PRE-RECORDED VIDEO – EVA.......................................................................................................................... 20
CHAPTER 6 – GROWTH ANALYSIS ........................................................................................................ 23
CASE 6.1 GROWTH SOLUTION................................................................................................................................. 32
CHAPTER 7 – LIQUIDITY RISK ANALYSIS .............................................................................................. 35
CHAPTER 8 – FORECASTING ................................................................................................................ 46
FORECASTING TEMPLATE ........................................................................................................................................ 58
CHAPTER 9 – VALUATION .................................................................................................................... 58
CHAPTER 10 – COST OF CAPITAL ......................................................................................................... 79
CHAPTER 11 – CORPORATE CREDIT ANALYSIS .................................................................................... 89
CHAPTER 11 – CREDIT ANALYSIS ..................................................................................................................... 91
CHAPTER 12 - EVALUATING AND REWARDING MANAGEMENT’S PERFORMANCE .................................. 95
BOCONCEPT – ACCOUNTING BASED BONUS PLAN..................................................................................................... 102
CHAPTER 13 - ACCOUNTING QUALITY ............................................................................................... 106
CASE 13.1 SOLUTION .......................................................................................................................................... 113
CHAPTER 14 - ACCOUNTING FLEXIBILITY IN THE INCOME STATEMENT ............................................. 114
CHAPTER 14 – NOTES FROM PRE-RECORDED VIDEO....................................................................................... 124
CHAPTER 16 – ACCOUNTING FLEXIBILITY AND CONSEQUENCES FOR USERS ....................................... 124
CHAPTER 17 – ADJUSTMENTS TO IMPROVE ACCOUNTING QUALITY (PRE-RECORDED) ....................... 138
CASE 17.1 ACCOUNTING QUALITY......................................................................................................................... 148
CASE 17.2 ACCOUNTING QUALITY......................................................................................................................... 150
MULTIPLE CHOICE 2019 .................................................................................................................... 154
MULTIPLE CHOICE OCTOBER 2020 .................................................................................................... 162
MULTIPLE CHOICE RE-TAKE 2020 ..................................................................................................... 172
EXAM JANUARY 2009 ........................................................................................................................ 183
EXAM MARCH 2009 ........................................................................................................................... 192
EXAM JANUARY 2010 ........................................................................................................................ 198
EXAM JANUARY 2011 ........................................................................................................................ 206
EXAM MARCH 2011 ........................................................................................................................... 218
EXAM MARCH 2010 ........................................................................................................................... 227
EXAM JANUARY 2012 ........................................................................................................................ 235
EXAM MARCH 2012 ........................................................................................................................... 246
EXAM JANUARY 2013 ............................................................................................................................ 1
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EXAM MARCH 2013 ............................................................................................................................... 7
EXAM JANUARY 2014 .......................................................................................................................... 15
EXAM MARCH 2014 ............................................................................................................................. 26
EXAM JANUARY 2015 .......................................................................................................................... 42
EXAM JANUARY 10. 2015.......................................................................................................................... 52
EXAM JANUARY 2016 .......................................................................................................................... 65
EXAM JANUARY 2017 .......................................................................................................................... 72
EXAM FEBRUARY 2017 ........................................................................................................................ 81
EXAM JANUARY 2018 .......................................................................................................................... 89
EXAM MARCH 2018 ........................................................................................................................... 100
EXAM JANUARY 2020 ........................................................................................................................ 112
EXAM FEBRUARY 2019 ...................................................................................................................... 122
EXAM JANUARY 2019 – RETAKE ........................................................................................................ 133
EXAM JANUARY 2021 ........................................................................................................................ 135
RANDOM EXAM ................................................................................................................................. 146
Lecture 1
3-leg monster:
1. Equity oriented stakeholders (investors, firms, corporate finance analysts)
2. Debt-capital-oriented stakeholders (Banks, mortgage-credit analysts etc)
3. Performance-oriented stakeholders (management, the board, investors)
Purpose of the analysis determines which decision model to apply. The decision model determines
which types of information are requested and which financial ratios are used in the financial
statement analysis.
Cash flow valuation are not very cost-efficient because they require forecasting (time consuming)
2
Downloadet af Brage Lykseth ()
, lOMoARcPSD|5970785
Price multiples are cost efficient because they are easier to calculate
Asset-based-approach (net asset value (NAV)) Etc.
Chapter 2 – Introduction to financial statements and bookkeeping
A company must provide an annual report as well as potential supplementary reports
- Must supply a statement of changes in owner’s equity
Key elements of financial statements:
- Income statement and statement of comprehensive income
- Balance sheet
- Cash flow statement
- Statement of changes in owner’s equity
Revenues
-Expenses
=Earnings for the period
Financial statement users want to know:
- Which revenues and expenses are recognized (Recognition criteria)
- When are revenues and expenses recognized (Recognition criteria)
- How are revenues and expenses measured? (Measurement attributes)
- How are revenues and expenses presented? (Classification issues)
An income statement shall as a minimum include:
- Revenues
- Finance costs
- Share of the profit or loss associated and joint ventures accounted for using the equity
method
- Post tax profit or loss of discontinued operations
- Tax expenses
Examples of items that might need to be included:
- Write-downs
- Restructuring of activities
- Disposals of items, property, plant and equipment
A company shall present an analysis of expenses, classifying them either by nature or function
3
Downloadet af Brage Lykseth ()
, lOMoARcPSD|5970785
Nature: Raw materials, staff, costs, depreciation etc.
Function: Cost of goods sold, distribution costs, administrative expenses.
Statement of comprehensive income presents all income and expense items, whether or not these
are recognized in the income statement.
Statement of changes in owner’s equity
- Reconciles equity at the beginning of the period with equity at the end of the period
Significant items
- Retained earnings (accumulation of profit (and losses) over time, not of dividends)
- Revaluing property (to fair value) –“Revaluation services”
- Currency translations
- Matters that are not part of the operations, but sadly between shareholders such as
repurchase of shares and increase in share capital.
Double-bookkeeping or double-entry bookkeeping
- Total amounts of credit must equal the amounts of debits for each transaction
Chapter 3 – Accrual-based versus cash-flow-based performance measures
Accrual-based performance measures: EBIT and net earnings
- Arguments against: historically oriented and easily manipulated.
FASB sees the accrual income statements as superior to the net cash flow statement for measuring a
company’s value creation (earnings capacity) within a given period
Unused purchases at the end of the period are recognized as inventory in accrual-based accounting
Differences between accrual-based accounting and cash flows are made up in net working capital.
- Cash flow accounting is more prudent because it does not take a sale into account before
cash is received.
Measuring earnings capacity
4
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