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23 Cards in this Set

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What is Quality of Earnings?

Refers to how solid the earnings numbers in the income statement are. Considers two aspects: content and presentation; where content refers to information which is unbiased, and presentation refers to info which is transparent

What is Earnings Management?

The process of targeting certain earnings levels or desired earnings trends and then working backwards to determine what has to be done to ensure these targets are met

What is one of the best ways to detect earnings management?

compare earnings with cash flows as cash flows are less subject to manipulation

What are two ways of measuring income?

Net Income and Comprehensive Income

Which accounting standard generally supports the Net Income method of measuring income?

ASPE

What is the net income method of measuring income?

Revenues and Gains less expenses and losses both

What the the Comprehensive Income Method of measuring income?

Net Income plus other comprehensive income (OCI)

Which accounting standard generally supports the comprehensive income method of measuring income?

IFRS

What are some gains and losses that are represented in the OCI method of income measurement?

Unrealized Gains/ Losses on securities


Foreign Exchange gains/losses





Which account is OCI closed out to?

AOCI - Accumulated Other Comprehensive Income

What method of income measurement allows for the calculation of EPS?

Net Income Method

What are discontinued operations?

Components of an entity that have been disposed of or classified as "held for sale"

What is the general definition of a Component

a group of assets which is able to gernerate its own net cash flows and be operationally distinct

How would an asset held for sale be shown on the statement of financial position? (IFRS)

All assets held for sale will be shown as current assets and would no longer be depreciated

What is Intraperiod Tax Allocation? When is it used (3)?

When irregular items are shown net of tax on the income statement. Used in: Income from continuing operations, discontinued operation, OCI.

Which reporting standard closes out to Statement of Retained Earnings?

ASPE

Which reporting standard closes out to statement of Changes in Equity?

IFRS

What is included in the Statement of Retained Earnings?

Beg RE + Net income- Dividends = End RE

Liquidity

The amount of time it takes for an asset to be turned into cash or for a liability to be paid.

Solvency

Reflects a company’s ability to pay its debt and related interest

Financial Flexibility

A company’s ability to alter the timing of its cash flows to respond to unexpected needs and opportunities

What formula can you use to determine Profit?

Beg RE + Net Income - Dividends= End RE

How do you Calculate FCF

Cash flow from Operating Activities - Capital Expenditures– Dividends