Flashcards
CMA Part 2 Section A
Cards in this deck (11)
- 1Section A Financial StatementDifferent types of Financial Statements
-Balance Sheet or Statement of Financial Position
-Income Statement
-Comprehensive Income
-Statement of Cash Flows
-Changes in Stockholder's equity - 2Users of Financial StatementsDirect users are individuals who are directly affected by the results of a company. They include investors, potential investors, employees, management, suppliers, and creditors. These are individuals who are at risk of losing financially because of their relationship with the company.
- 3Balance SheetAssets = Liabilities + Equity
Provides a relationship of above with each other at a POINT IN TIME
Balance sheet accounts are permanent accounts. They are not closed out at the end of an accounting period but rather, their balances are cumulative. - 4Balance Sheet AssetsAssets are:
-past transactions
-present ownership
-future economic benefit - 5Balance Sheet LiabilitiesLiabilities are:
-past transaction
-present obligation
-future benefit to other organization - 6Balance Sheet Current AssetsCurrent assets are assets that will be converted into cash, sold or consumed within 12 months or within one operating cycle if the operating cycle is longer than 12 months
Operating Cycle = Accounts Receivable Days + Inventory Days
An asset that will be converted in 18 months may be classified as a current asset, but all assets that will be converted in less than 12 months will always be classified as current assets.
Examples of current assets include:
-Cash
-Cash equivalents
-inventories
-receivables
-short-term investments maturing in less than one year
-prepaid expenses - 7Balance Sheet Current LiabilitiesCurrent liabilities are liabilities that will be settled within one year or during the operating cycle if it is longer than one year.
Examples of current liabilities are:
-accounts payable
-trade notes payable
-dividends payable
-unearned revenues
-obligations that, by their terms, are due on demand - 8Balance Sheet Non current assetsNon current assets are those assets that will not be converted into cash within one year or during the operating cycle if the operating cycle is longer than one year.
Examples of current assets include: long-term investments and funds, propertyplant and equipment (fixed assets), intangible assets, other noncurrent assets (deferred tax assets, long-term prepayments and receivables, etc. - 9Balance Sheet Non Current LiabilitiesNon current liabilities are those liabilities that will not be settled within one year or the operating cycle if the operating cycle is longer than one year.
Examples of noncurrent liabilities are: long-term notes or bonds payable, liabilities from capital leases, pension obligations, deferred tax liabilities, obligations under warranty agreements, advances for long-term commitments to provide goods and services, and long-term deferred revenue. - 10Balance Sheet Owner's equityOwner´s equity is the amount of the company’s assets owned by and owed to the owners.
Three categories:
- Capital contributed by owners from the sale of shares
–Retained earnings
–Accumulated other comprehensive income items - 11Limitations of a Balance Sheet-Many assets are not reported on the balance sheet, even though they have value and will generate future cash flows (employees, processes, competitive advantages, etc).
–Certain assets are valued at historical cost, not market value, replacement cost, or their value to the firm.
–Judgments and estimates are used in determining many of the items reported in the balance sheet.
–Most liabilities are valued at the present value of cash flows when the liability was incurred, not at the present value of cash flows at the current market rates.
FV= PV (1 + i)^n
PV = FV /(1+i)^n
For example, if future liability is 100m after 5 years, then current liability at 10% interest becomes
PV = 100/ (1+.1)^5
=62m
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- Flashcards on CMA Part 2 Section A, created by prateeksax on 11/06/2014.
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- prateeksax
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