Financial statement analysis concepts tested on the CFA Level 1 financial reporting and analysis topic area.
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- What accounting basis records transactions when they occur rather than when cash changes hands?
- Accrual basis accounting.
- Under accrual accounting, when is revenue recognized?
- When it is earned, regardless of when cash is received.
- What principle requires expenses to be recognized in the same period as the revenues they helped generate?
- The matching principle.
- Which financial statement reports a company's revenues and expenses over a period of time?
- The income statement.
- Which financial statement reports a company's assets, liabilities, and equity at a single point in time?
- The balance sheet.
- Which financial statement classifies cash flows as operating, investing, and financing?
- The statement of cash flows.
- Which financial statement reconciles the beginning and ending balance of each equity component?
- The statement of changes in equity.
- The basic accounting equation is Assets = ____.
- Liabilities + Equity
- On a classified balance sheet, assets expected to be converted to cash within one year (or the operating cycle) are classified as what?
- Current assets.
- What is the formula for gross profit?
- Revenue minus cost of goods sold.
- What does EBIT stand for?
- Earnings before interest and taxes.
- What does EBITDA add back to EBIT?
- Depreciation and amortization.
- What is comprehensive income?
- Net income plus other comprehensive income (OCI).
- Give one example of an item reported in other comprehensive income (OCI).
- Unrealized gains or losses on available-for-sale securities.
- What is the formula for basic earnings per share (EPS)?
- (Net income minus preferred dividends) divided by weighted average common shares outstanding.