Financial Reporting & Analysis Flashcards

Which financial statement provides a snapshot of a company's financial position at a specific point in time?

Answer: Balance Sheet

The balance sheet reports assets, liabilities, and equity as of a specific date, representing the company's financial position at that moment.

Under US GAAP, which inventory costing method assumes the most recently purchased items are sold first?

Answer: LIFO

LIFO (Last-In, First-Out) assumes the most recently acquired inventory is sold first, which is permitted under US GAAP but not IFRS.

What does EBITDA stand for?

Answer: Earnings Before Interest, Taxes, Depreciation, and Amortization

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, and is widely used as a proxy for operating cash flow.

Which accounting principle requires that expenses be recognized in the same period as the revenues they helped generate?

Answer: Matching Principle

The matching principle dictates that expenses must be recorded in the same accounting period as the revenues they are associated with.

A company has total assets of $500,000 and total liabilities of $200,000. What is shareholders' equity?

Answer: $300,000

The accounting equation is Assets = Liabilities + Equity, so Equity = $500,000 − $200,000 = $300,000.

Which depreciation method allocates an equal amount of depreciation expense to each accounting period over an asset's useful life?

Answer: Straight-Line

The straight-line method spreads the depreciable cost evenly across each period of the asset's useful life.

Which of the following is classified as an operating activity in the cash flow statement under US GAAP?

Answer: Collection of accounts receivable

Collecting accounts receivable is directly related to core business operations, making it an operating activity under US GAAP.