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CFA-Financial Report


Role of financial reporting provide info about a company’s financial position and performance. Financial statement are issued by management
Role of financial statement analysis take the financial statements and evaluate the past, current, n prospective financial position n performance to make various decisions from them ex: investment
equity investors i. primarily interested in company’s long-term earning power, growth, and ability to pay dividends
short term creditors interested in immediate liquidity bc they seek an early payback of their investment ex: banks n trade creditors
long term creditors concerned with the company’s long term asset position n earning power ex: corporate bond owners such as insurance companies and pension funds
Income statement Measures success of a business for a given period of time=>looks at the in between period of 2 consecutive balance sheet dates
Goal of income statement analysis derive an effective measure of future earnings and cash flows
principal financial statements income statement, balance sheet, cash flow statement, statement of changes in owners' or stockholders' equity
Cash flow statement Provides info about a company’s cash receipts and cash payments. iii. Answers things like, where did the cash come from during the period? What was the cash used for? What was the change in the cash balance?
Cash flow statement Organization This is organized according to operating, investment and financing activities
Cash flow statement helps the users evaluate: liquidity, solvency, financial flexibility
Solvency Ability of a company to pay its debt as they mature
Liquidity “nearness to cash” of assets and liabilities
Financial flexibility a. Refers to a company’s ability to respond and adapt to financial adversity and unexpected needs and opportunities.
equity ownership owner’s investments and the total earnings retained from the commencement of the company. Equity represents the source of financing provided to the company by the owners.
Statement of changes in owners’ or stockholders’ equity Reports ownership interests in order of preference upon liquidation and dividends
financial notes i. part of the financial statements ii. provide info about the accounting methods, assumptions and estimates used by management to develop the data iii. provide additional disclosure in certain areas
supplementary schedules i. Additional data that is provided about assets and liabilities of a company outside the financial statements ii. Ex: impact of changing prices or gas reserve iii. Some of the supplementary data is unaudited
Management Discussion and Analysis (MD&A) requires management to discuss specific issues on the financial statements, and to asses the company’s current financial condition, liquidity, and its planned capital expenditure for the next year. ii. Not audited and for public companies only
Operating 1. Activities that are involved with running a business. These activities determine the net income and changes in the working capital account, ex: paying taxes
Investing 1. Activities associated with the spending needed to begin and continue operations, ex: buying land, selling resources when they are no longer needed
Financing 1. Activities associated to obtaining or repaying capital. Ex: issuing tock, obtaining loans from creditors, payment of dividends (considered a financing activity bc they are necessary to obtain funding).
Created by: ag2688