Practice

How are Unrealized Gains and Losses treated differently for Trading (FVPL) securities versus Available-for-Sale (AFS) securities?

What's the difference between Return on Equity and Return on Invested Capital, and when would you prefer one over the other?

Why do we add back stock-based compensation on the cash flow statement, but still treat it as a real cost to the company in valuation?

Why does a company issuing a Convertible Bond split it into separate Liability and Equity components at issuance?

How does Paid-in-Kind (PIK) interest differ from ordinary cash interest, mechanically?

Why doesn't goodwill amortize the way other intangible assets do?

A company decides to prepay an entire year of rent upfront in exchange for a discount, rather than paying month to month. Does this improve its cash flow?

Why does an increase in a company's Working Capital reduce its cash flow, even though "more working capital" sounds like a good thing?

What's the difference between EBIT and EBITDA, and why is EBITDA often used as a cash flow proxy?

Why is the majority of a company's Pension Expense on the income statement non-cash?

What's the practical difference between cash accounting and accrual accounting, using a sale made on credit as an example?

Could you construct a company's Income Statement using only its Balance Sheet and Cash Flow Statement? Why or why not?

Why might a company choose to issue a Convertible Bond instead of a traditional bond?

Walk me through the three financial statements.

What's the difference between an operating lease and a capital (finance) lease?

What does "Unfunded Pension" mean, and why does it get added to Enterprise Value?

A company keeps recording "Loss on Debt Extinguishment" whenever it repays debt early. Why does this happen?

Why can a company's reported Net Income sometimes exceed its Pre-Tax Income?

What do the leverage ratio and interest coverage ratio each tell you about a company?

What's a net operating loss carryforward, and how does it show up on the balance sheet?

What happens to a Convertible Bond's Liability and Equity components if it actually converts into shares before maturity?

What's the difference between Defined-Contribution and Defined-Benefit pension plans, and why is the accounting so much more complex for the latter?

Why might a company issue debt at an Original Issue Discount (OID) instead of at par?

A company issues debt and uses the proceeds to buy back stock, which increases its EPS. Why should you be skeptical of that improvement?

How might the financial statements of a company based in the U.K. or Germany look different from a U.S. company's, even though the underlying business is similar?

What's the difference between the equity method and consolidation accounting, and what determines which one applies?

What is working capital and why does it matter?

A company's EBITDA has grown 20% a year for three years, but it just filed for bankruptcy. How is that possible?

A company starts offering customers a 12-month installment plan instead of requiring full payment upfront. How does this affect its cash flow in the short term versus the long term?

What does a Noncontrolling Interest (NCI) on the balance sheet actually represent?

How can a company artificially boost its Return on Equity by using leverage, and what would you check to catch it?

Why might two companies with identical net income have very different cash flow from operations?

Name two ways a company's cash flow statement might look different if it reports under IFRS instead of U.S. GAAP.

What is a deferred tax liability, and when does it increase vs. decrease?

What's the difference between the Face Value, Book Value, and Market Value of a company's Debt?

A common misconception is that recent accounting rule changes eliminated the Available-for-Sale and Held-to-Maturity categories entirely. What actually changed?

How does Stock-Based Compensation's tax treatment change once employees actually exercise their options or receive their shares?

What's the difference between goodwill and other intangible assets created in an acquisition?

A company's Cash Flow Statement starts with Operating Income instead of Net Income. What should you do before using it in a model?

If inventory costs are rising, how do LIFO and FIFO differently affect a company's reported Net Income and Cash Flow?

Where does an increase in inventory show up across the three financial statements?

Why doesn't IFRS allow companies to use the LIFO inventory method?

Why aren't Preferred Dividends tax-deductible, even though they reduce the income available to common shareholders?

What's the difference between accounts receivable and deferred revenue?

A company has a Days Sales Outstanding of 5 and a Days Payable Outstanding of 60. What does that combination tell you about the company?