Analysis of Current Assets
In this module you will learn about current assets: inventories and assets created by capitalizing expenses. You will learn about:
- Various ways of accounting for inventory: LIFO, FIFO, and average cost
- The impact of inventory accounting on reported earnings, taxes paid, and financial ratios
- Creation and depletion of LIFO reserve
- How and why certain expenses may be capitalized instead of being reported in the income statement reported earnings
- The effects of capitalizing versus expensing on net income variability, profitability, cash flow from operations, and leverage ratios
- The circumstances under which intangible assets, including software development costs, are capitalized
Analysis of Long Term Assets
In this module you will learn about the accounting and analysis of long term assets. The three process that affect the long term assets of a company are acquisition, depreciation and impairment.
Depreciation is a system of allocating the cost of long-term assets over their useful life
Impairment relates to the decrease in the fair value of an asset and the realization that some or all of the carrying cost will not be recovered
How the choice and changing of depreciation methods or changing the estimated useful life or salvage value of an asset affects financial statements and ratios
The role of depreciable lives and salvage values in the computation of depreciation expenses
The effects on financial statements and ratios of an impairment write-down
Analysis of Corporate Taxes
Income tax accounting has many complexities since tax reporting and financial reporting are based on two different sets of assumptions:
- Financial reporting is based on accrual accounting.
- Tax reporting is based on changing tax code set by the government.
It is important to understand the key terms used in accounting for income taxes in order to understand the difference between accounting for tax reporting and accounting for financial reporting. Income taxes payable is based on taxable income while income tax expense is based on book income, and these are not necessarily equal. This gives rise to deferred tax assets and liabilities.
Analysis of Debt, Leases and Off-Balance Sheet Financing
In this module you will learn about the accounting and analysis of corporate liabilities. You will learn about:
- The recognition of a liability and disclosure requirements
- Valuation of the debt and the impact on company's short-term liquidity and long-term financial solvency
- The effects of debt issuance and amortization on the income statement, balance sheet, and cash flow statement
- The effects of the issuance and the conversion of convertible bonds, warrants, and convertible preferred stock on financial statements and ratios
- Classification of leases as capital or operating
- and the impact of this choice on financial statements and ratios and the difference between a sales-type lease and a direct-financing lease
- Types of off-balance-sheet financing, including take-or-pay contracts, throughput arrangements, and the sale of receivables
Analysis of Earnings Quality
This lesson looks at how to judge the quality of the earning reported by a firm. You will learn about:
- Simple and complex capital structures for purposes of calculating earnings per share (EPS)
- The effect of stock dividends and stock splits on a company's weighted average number of shares outstanding.
- Basic versus diluted EPS
- The effects of convertible securities, options, and warrants on a company's EPS
- Accounting irregularities or "financial shenanigans" that disguise the true earnings of a company
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