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Financial Statement AnalysisModule 2 of 9

Analyzing Income Statements

6

Concepts

6

Formulas

1

Decisions

4

Quiz Questions

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Key Concepts

6 concepts covered in this module.

Revenue Recognition

IFRS 15 / ASC 606: 5-step model. Recognize when performance obligation satisfied and control transfers to customer.

Expense Recognition (Matching)

Expenses matched to the revenues they help generate. Period costs expensed immediately; product costs match to sales.

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Formulas

6 essential formulas for this module.

Basic EPS

Basic EPS = (Net Income - Preferred Dividends) / Weighted Avg Common Shares

Where: Only common shareholders' income

Diluted EPS (Convertible Bonds)

Diluted EPS = (NI - PD + Interest×(1-t)) / (WACS + New shares from conversion)

Where: If-converted method: add back interest, add converted shares

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Decision Frameworks

1 decision frameworks to guide your analysis.

Capitalize or Expense?

  • Capitalize: future economic benefit expected (>1 year), cost reliably measurable
  • Expense: no future benefit, or benefit is uncertain

Mind Map

Visual overview of how concepts connect in this module.

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Flashcard

Revenue Recognition

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Answer
IFRS 15 / ASC 606: 5-step model. Recognize when performance obligation satisfied and control transfers to customer.
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Introduction to Financial Statement Analysis

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Analyzing Balance Sheets