Summary: Financial Reporting & Analysis

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• 1 Week 1

• 1.1 Hoorcollege 1

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• Out of which 2 things do information problems consist?

  - Information asymmetry
  - Conflict of interest

• Which accounting tools are there to fix information problems?

  - Standardization & regulation
  - Certification (auditing)
  - Accrual accounting

• Out of which three activities does the simple direct cashflow statement consist?

  Operating, investment & financing activities.

• What do you do if a cash flow is not earned or used in the current period?

  Include it in the balance sheet as a resource or obligation.

• What is the main difference between direct and indirect cashflow?

  The direct method uses cash payments and cash receipt while the indirect uses operating profit and adjusts this with the accruals to get the operational cash flow. After, the indirect method adds the investment and financing cashflow to that.

• Hich cashflow items are not part of performance of the company’s current operations:

  - Loan from bank
  - Own equity investment

• What does the Statement of Changes in Equity do?

  It details the changes in equity during a reporting period

• Which posts have an impact on the statements of changes in Equity and how?

  - Retained earning (add: profit and loss from the income statement; deduct: dividends)
  - Contributed capital (add: funds received from share issuance; deduct funds spent on share purchases)
  - Other comprehensive income that is not included in profit or loss

• In which matrix can the performance predictability of stocks by using accruals be calculated/visualized?

  In a matrix that uses average stock returns (R) on the y-axis and the FCF, OCF or OP on the x-axis.

• How can accrual accounting contribute to the performance predictability of stocks?

  It can help remove unpredictable cash flow shocks.