Strategic Insights into Financial Statements and
Corporate Health | Verified Questions and Answers
list the 4 main financial statements, if you could only have one statement to analyze, which one would
you choose and why? - ✔✔
1. income statement
2. Balance Sheet
3. Cash Flow
4. Statement of Retained Earnings
Cash flow - companies now on cash
What is the difference between cash and accrual accounting? include financial statements as examples
of each in your answer. - ✔✔cash is cash. accrual assigns costs to a production of an accounting period
whether or not the cash flow actually occurs. ex I/S - accrual, CF- cash
current assets - ✔✔inventories, prepaid expenses, change in accounts receivable
income statement - ✔✔cost of goods sold, interest expense, impairment charges, dividends paid
cash flow from operations - ✔✔change in AR, impairment charges
Shareholders' Equity - ✔✔repurchases of common stock, dividends paid, treasury stock
goodwill, accumulated depreciation, purchases of capital equipment, impairment charges - ✔✔long
term assets
current liabilities - ✔✔accounts payable
cash flow from investing - ✔✔purchases of investment securities, proceeds from business disposition,
purchases of capital equipment
, cash flow from financing activities - ✔✔treasury stock, dividends paid, repurchases of common stock
what is meant by book value? is it an accurate measurement? why or why not? - ✔✔assets- liabilities or
net worth. no because assets on the balance sheet are not always carried at fair market value.
what is meant when an auditors report is "qualified"? - ✔✔the auditors have found at least one item
from the financials that is not in-compliance with GAAP
what is the purpose of a deferred tax account? what causes changes to the balances in this account? -
✔✔timing difference between reported financials and tax fillings. Accelerated costs on the tax filings.
What is the difference between basic and diluted shares outstanding? In your opinion, which metric
would be a better measure and why? - ✔✔Diluted includes all potentially diluted shares from options
that have not been issued yet. restricted stock.
what is the difference between a defined contribution pension plan and a defined benefit pension plan?
If a pension plan had $1.2 billion in assets and $1.4 billion in obligations, would the plan be overfunded
or unfunded? is this liability/ asset carried on the balance sheet (yes or no)? - ✔✔benefit - guarantees a
benefit, a set amount of money
contribution- only guarantees they will make a contribution, does not guarantee an account.
$200 mil underfunded, yes
on which financial statement would you look to find the number of treasury shares issued and/ or
repurchased in a given year? - ✔✔statement of retained earnings
an increase in inventory - ✔✔decrease
a decrease in accounts payable - ✔✔decrease
an increase in goodwill - ✔✔decrease
Corporate Health | Verified Questions and Answers
list the 4 main financial statements, if you could only have one statement to analyze, which one would
you choose and why? - ✔✔
1. income statement
2. Balance Sheet
3. Cash Flow
4. Statement of Retained Earnings
Cash flow - companies now on cash
What is the difference between cash and accrual accounting? include financial statements as examples
of each in your answer. - ✔✔cash is cash. accrual assigns costs to a production of an accounting period
whether or not the cash flow actually occurs. ex I/S - accrual, CF- cash
current assets - ✔✔inventories, prepaid expenses, change in accounts receivable
income statement - ✔✔cost of goods sold, interest expense, impairment charges, dividends paid
cash flow from operations - ✔✔change in AR, impairment charges
Shareholders' Equity - ✔✔repurchases of common stock, dividends paid, treasury stock
goodwill, accumulated depreciation, purchases of capital equipment, impairment charges - ✔✔long
term assets
current liabilities - ✔✔accounts payable
cash flow from investing - ✔✔purchases of investment securities, proceeds from business disposition,
purchases of capital equipment
, cash flow from financing activities - ✔✔treasury stock, dividends paid, repurchases of common stock
what is meant by book value? is it an accurate measurement? why or why not? - ✔✔assets- liabilities or
net worth. no because assets on the balance sheet are not always carried at fair market value.
what is meant when an auditors report is "qualified"? - ✔✔the auditors have found at least one item
from the financials that is not in-compliance with GAAP
what is the purpose of a deferred tax account? what causes changes to the balances in this account? -
✔✔timing difference between reported financials and tax fillings. Accelerated costs on the tax filings.
What is the difference between basic and diluted shares outstanding? In your opinion, which metric
would be a better measure and why? - ✔✔Diluted includes all potentially diluted shares from options
that have not been issued yet. restricted stock.
what is the difference between a defined contribution pension plan and a defined benefit pension plan?
If a pension plan had $1.2 billion in assets and $1.4 billion in obligations, would the plan be overfunded
or unfunded? is this liability/ asset carried on the balance sheet (yes or no)? - ✔✔benefit - guarantees a
benefit, a set amount of money
contribution- only guarantees they will make a contribution, does not guarantee an account.
$200 mil underfunded, yes
on which financial statement would you look to find the number of treasury shares issued and/ or
repurchased in a given year? - ✔✔statement of retained earnings
an increase in inventory - ✔✔decrease
a decrease in accounts payable - ✔✔decrease
an increase in goodwill - ✔✔decrease
