Common-size Cash Flow Statements
Users of financial statements can obtain helpful information about a company by analyzing its cash flow statement. This can help them understand the company’s business and earnings and predict its future cash flows. The tools and techniques used in analyzing…
Cash Flow Statement Under US GAAP and IFRS
Several differences exist between how the cash flow statement is prepared under IFRS and US GAAP. The most significant difference is that IFRS gives companies more flexibility regarding how interest is paid or received, how dividends paid or received are…
Indirect to Direct Method
Sometimes, a company may prepare the cash flow from the operations section of its cash flow statement using an indirect method. However, users of its financial statements may desire to review the direct-format cash flow from operations. This may arise…
Preparation of Direct and Indirect Cash Flows
The first step in preparing the cash flow statement involves the determination of the total cash flows from operating activities. The cash flow from the operations section of the cash flow statement can be presented using either the direct or…
Link Between Cash Flow Statement and Income and Balance Sheet Statement
Financial statements are interconnected, each serving a unique function in providing detailed information about a company’s financial activities. The four primary financial statements are: The four primary financial statements are interconnected, each serving a unique function in providing detailed information…
Common-size Balance Sheet and Related Financial Ratios
Examining a company’s balance sheet can reveal information about its liquidity and solvency at the time the balance sheet is prepared, as well as the economic resources under the company’s control. Recall that liquidity is defined as the company’s ability…
Non-current Liabilities
Non-current liabilities refer to all liabilities that are not classified as current. Common types of non-current liabilities are long-term financial liabilities and deferred tax liabilities. Long-Term Financial Liabilities Common types of long-term financial liabilities are bank loans and fixed-income securities…
Financial Instruments
According to the IFRS, a financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. Financial assets include investments in stocks of other companies or in…
Goodwill
When a company acquires another, the acquisition price is allocated to all identifiable assets (both tangible and intangible) and liabilities based on their fair value. If the acquisition price exceeds the fair value of these identifiable assets and liabilities, the…
Intangible Assets
Intangible assets are non-monetary assets without physical substance. They are identifiable, which implies that they are either separable (capable of being separated and sold, transferred, licensed, rented, or exchanged) or arise from contractual or other legal rights. Examples include patents,…
