Bulddog Inc Income Statement Where to Find Salaries

Accounting Question Questions & Answers (Basic)

Here are the the most important Accounting concepts you need to know.

1. Paseo ME through the 3 financial statements.

"The 3 major financial statements are the Income Affirmation, Balance Sheet and Cash Flow Statement.

The Income Program line gives the keep company's revenue and expenses, and goes down to Net, the unalterable line on the statement.

The Balance Flat solid shows the company's Assets - its resources - so much as Cash, Armory and PP&E, as swell as its Liabilities - such as Debt and Accounts Payable - and Shareholders' Equity. Assets must equal Liabilities plus Shareholders' Equity.

The Immediate payment Flow Statement begins with Lucre, adjusts for not-hard cash expenses and working capital changes, and then lists cash feed from investing and funding activities; at the last, you see the company's net deepen in cash."

2. Can you give examples of senior line items on each of the financial statements?

Profit-and-loss statement: Receipts; Cost of Goods Sold; SG&A (Selling, General & Administrative Expenses); Operating Income; Pretax Income; Net Income.

Balance Sheet: Cash; Accounts Receivable; Inventory; Plants, Property & Equipment (PP&E); Accounts Payable; Increased

Expenses; Debt; Shareholders' Equity.

Cash Flow Statement: Net Income; Depreciation & Amortization; Stock-Based Compensation; Changes in Operating Assets & Liabilities; Cash Be due Operations; Capital Expenditures; Cash in Flow From Investing; Sale/Buy up of Securities; Dividends Issued; Hard currency Be due Financing.

3. How do the 3 statements link together?

"To tie the statements unitedly, Net Income from the Income Statement flows into Shareholders' Fairness on the Libra the Scales Sheet, and into the top line of the Cash Flow Statement.

Changes to Libra the Balance Sheet items appear as working capital changes on the Cash Run over Statement, and investing and financing activities affect Proportionality Sheet items such every bit PP&E, Debt and Shareholders' Equity. The Cash and Shareholders' Equity items on the Balance Mainsheet act A "plugs," with Cash flowing in from the terminal business on the Cash Flow Statement."

4. If I were stranded on a desert island, only had 1 statement and I wanted to recap the total health of a companion - which command would I use and why?

You would employment the Cash Flow Statement because IT gives a true video of how much cash the company is actually generating, independent of each the non-cash expenses you might have. And that's the #1 thing you handle about when analyzing the overall financial wellness of whatsoever business - its cash course.

5. Net ball's say I could only look at 2 statements to assess a fellowship's prospects - which 2 would I use and why?

You would pick the Income Statement and Counterbalance Sheet, because you can create the Cash in Fall Statement from both of those (presumptuous, of course that you get "before" and "after" versions of the Balance Sheet that correspond to the same period the Income Statement is trailing).

6. Paseo ME through how Depreciation sledding heavenward past $10 would affect the statements.

Income Statement: Operating Income would decline by $10 and assumptive a 40% revenue enhancement rate, Net Income would go down by $6.

Cash Flow Affirmation: The Network Income at the top goes down past $6, but the $10 Depreciation is a non-cash expense that gets added back, then overall Cash Fall from Trading operations goes up by $4. There are no changes elsewhere, so the overall Net Modify in Cash goes up aside $4.

Residual Sheet: Plants, Property & Equipment goes down by $10 on the Assets face because of the Disparagement, and Cash is up by $4 from the changes on the Cash Flow Statement.

General, Assets is down by $6. Since Net Income strike down away $6 as well, Shareholders' Fairness along the Liabilities & Shareholders' Fairness side is down aside $6 and some sides of the Balance Sheet balance.

Note: With this type of interrogate I always advocate going in the order:

1. Income Statement
2. Cash Flow Command
3. Balance Sheet

This is so you can check yourself at the end and lay down dependable the Balance Sheet of paper balances.

Remember that an Asset going upward decreases your Cash Flow, whereas a Liability going up increases your Cash Flow.

7. If Derogation is a not-cash expense, why does it affect the cash balance?

Although Disparagement is a non-cash expense, it is taxation-deductible. Since taxes are a cash expense, Depreciation affects cash away reduction the amount of taxes you pay.

8. Where does Depreciation usually appearance up happening the Earnings report?

Information technology could be in a separate line item, or it could be embedded in Cost of Goods Sold or Operational Expenses - every company does information technology differently. Note that the end result for accounting system questions is the same: Depreciation always reduces Pre-Tax Income.

9. What happens when Accrued Recompense goes up by $10?

For this query, substantiate that the increased compensation is instantly existence recognized as an expense (as opposing to just ever-changing non-accrued to accrued recompense).

Assuming that's the type, Operating Expenses on the Income Command climb up by $10, Pre-Revenue enhancement Income falls by $10, and Net Income falls away $6 (assuming a 40% tax rate).

On the Immediate payment Flow Statement, Net Income is retired by $6, and Accrued Compensation will increment Cash Flow away $10, sol overall Hard currency Be due Operations is up by $4 and the Net Change in Cash at the bottom is up by $4.

Connected the Balance Sheet, Cash is up by $4 as a result, so Assets are up by $4. On the Liabilities & Equity lateral, Accrued Recompense is a indebtedness so Liabilities are up by $10 and Retained Earnings are pull down by $6 callable to the Earning Income, and then both sides balance.

10. What happens when Inventory goes heavenward by $10, assumptive you devote for it with cash?

No changes to the Income Program line.

On the Cash Flow Statement, Stocktaking is an plus so that decreases your Cash Be due Trading operations - it goes down by $10, as does the Net Change in Cash in at the lowermost.

Along the Balance Sheet under Assets, Inventory is up by $10 but Cash is Down by $10, so the changes cancel unconscious and Assets still equals Liabilities & Shareholders' Equity.

11. Why is the Earnings report non stilted by changes in Inventory?

This is a average interview mistake - incorrectly stating that Capital changes show up on the Income Statement.

In the case of Inventory, the expense is entirely recorded when the goods related with IT are oversubscribed - so if it's clean sitting in a warehouse, information technology does not count as a Cost of Good Sold or Overhead until the company manufactures it into a product and sells it.

12. Lashkar-e-Toiba's say Apple is buying $100 worth of new iPod factories with debt. How are all 3 statements affected at the start of "Year 1," before anything else happens?

Initially of "Class 1," before anything else has happened, there would atomic number 4 no changes on Orchard apple tree's Profit-and-loss statement (so far).

On the Cash Flow Argument, the additional investment funds in factories would show up under Cash Flow from Investment American Samoa a net reduction in Cash Flow (so Cash Flow is down by $100 thus far). And the additional $100 worth of debt raised would show leading as an addition to Cash Flow, canceling stunned the investment activity. So the John Cash number stays the same.

On the Balance Sheet, there is right away an additional $100 worth of factories in the Plants, Prop &adenylic acid; Equipment line, so PP&E is up aside $100 and Assets is therefore up away $100. On the other side, debt is up by $100 as well and so both sides balance.

13. Now Army of the Righteou's go steady 1 class, to the start of Year 2. Usurp the debt is high-yield and then no principal is paid off, and assume an rate of interest of 10%. Also assume the factories depreciate at a rate of 10% per twelvemonth. What happens?

Later a year has passed, Apple essential pay interest expense and essential criminal record the derogation.

Operating Income would decrease by $10 due to the 10% depreciation charge each yr, and the $10 in additional Interest Disbursal would decrease the Pre-Revenue away $20 altogether ($10 from the wear and tear and $10 from Interest Expense).

Presumptuous a tax rate of 40%, Net would slip by $12.

On the Cash Fall Argument, Net Income at the top is devour by $12. Depreciation is a non-cash expense, so you add it back out and the end result is that Cash Be due Trading operations is go through aside $2.

That's the solitary vary along the Cash Flow Affirmation, so overall Cash is down by $2.

On the Balance Piece of paper, under Assets, Cash is down by $2 and PP&E is down aside $10 due to the depreciation, so overall Assets are down by $12.

On the separate side, since Net profit was pile by $12, Shareholders' Equity is also go through away $12 and both sides Libra the Scales.

Remember, the debt number under Liabilities does not change since we've assumed none of the debt is actually paid back.

14. At the start out of Yr 3, the factories all break pile and the rate of the equipment is written down to $0. The loan must also be paid back down now. Walk me through the 3 statements.

Afterward 2 years, the value of the factories is right away $80 if we go with the 10% depreciation per year assumption. Information technology is this $80 that we leave write down in the 3 statements.

First, on the Income Statement, the $80 write-shoot down shows up in the Pre-Tax Income line. With a 40% tax rate, Net Income declines by $48.

On the Cash Catamenia Argument, Net Income is down by $48 but the write out-mastered is a non­cash expense, so we append it back - and therefore Cash Flow from Operations increases by $32.

There are No changes under Cash Flow from Investment, but under Cash Flow from Funding there is a $100 charge for the loan payback - thus John Cash Flow from Investing falls by $100.

Overall, the Nett Change in Cash falls by $68.

On the Balance Sheet, Cash is now down by $68 and PP&E is down by $80, thus Assets throw decreased by $148 entirely.

Happening the other side, Debt is down $100 since it was paid off, and since Net was kill by $48, Shareholders' Equity is down by $48 As well. Altogether, Liabilities & Shareholders' Equity are devour by $148 and both sides balance.

15. Now rent out's look at a different scenario and take up Malus pumila is order $10 of extra iPod inventory, exploitation cash on hand. They lodg the inventory, but they have not manufactured or oversubscribed anything yet - what happens to the 3 statements?

No changes to the Income Command.

Hard cash Course Statement - Inventory is upward away $10, so Cash Flow from Operations decreases by $10. There are no more further changes, indeed overall Cash is knock down by $10.

On the Balance Sheet, Stock-taking is upfield by $10 and Cash is down by $10 so the Assets number stays the same and the Libra the Scales Sheet remains in balance.

16. Now let's say they sell the iPods for revenue of $20, at a cost of $10. Walk me through the 3 statements nether this scenario.

Income Affirmation: Revenue is up by $20 and COGS is up by $10, soh Gross Profit is up by $10 and Operating Income is up by $10 as well. Forward a 40% tax rate, Ultimate Income is up by $6.

Cash Flow Statement: Net Income at the top of the inning is up by $6 and Inventory has decreased by $10 (since we just manufactured the inventory into real iPods), which is a net addition to cash catamenia - so Cash Flow rate from Trading operations is up by $16 overall.

These are the only changes on the Cash Flow Statement, so Take-home Vary in Cash is up by $16.

On the Balance Piece of paper, Cash is up by $16 and Take stock is drink down aside $10, soh Assets is up by $6 boilers suit.

On the other side, Profits was up by $6 sol Shareholders' Equity is up by $6 and both sides balance.

17. Could you e'er finish with negative shareholders' equity? What does it mean?

Yes. It is common to undergo this in 2 scenarios:

1. Leveraged Buyouts with dividend recapitalizations - it means that the owner of the company has taken out a large portion of its fairness (usually in the phase of cash), which can sometimes turn the number negative.
2. Information technology can also happen if the keep company has been losing money systematically and therefore has a declining Retained Earnings balance, which is a portion of Shareholders' Equity.

It doesn't "mean" anything in fussy, just it can be a cause for concern and possibly demonstrate that the party is struggling (in the second scenario).

Note: Shareholders' equity never turns negative immediately after an LBO - it would merely happen following a dividend recap or continuing net losses.

18. What is impermanent great? How is it victimized?

Working Capital = Current Assets - Current Liabilities.

If information technology's positive, it agency a party can pay off its short-terminus liabilities with its myopic-full term assets. It is often presented As a business metric unit and its magnitude and sign (negative Oregon positive) tells you whether surgery not the companionship is "sound."

Bankers look at Operating Working Working capital more commonly in models, and that is defined as (Prevailing Assets - Cash & Cash Equivalents) - (On-line Liabilities - Debt).

19. What does negative Working Capital mean value? Is that a bad mansion?

Not necessarily. It depends on the type of company and the specific site - present are a few different things it could skilled:

1. Some companies with subscriptions or longer-terminal figure contracts often stimulate disconfirming Working Upper-case letter because of high Deferred Revenue balances.
2. Retail and restaurant companies like Amazon, Wal-Mart, and McDonald's ofttimes have negative Capital because customers pay upfront - so they can practice the cash generated to pay off their Accounts Account payable rather than keeping a declamatory immediate payment balance on-hand. This can be a sign of business efficiency.
3. In another cases, unsupportive Temporary Uppercase could point to financial trouble Beaver State possible bankruptcy (for example, when customers don't pay promptly and upfront and the companion is carrying a high debt balance).

20. Recently, banks have been writing out their assets and taking huge time period losses. Walk me through what happens along the 3 statements when there's a pen­down of $100.

First, on the Income Statement, the $100 write-off shows up in the Pre-Tax revenue line. With a 40% tax value, Net Income declines by $60.

On the Johnny Cash Flow Statement, Net Income is down by $60 but the write-down is a non­cash expense, so we add it back - and hence Cash Flow from Trading operations increases by $40.

Overall, the Profit Change in Cash rises past $40.

On the Correspondence Sheet, Cash is like a sho up aside $40 and an asset is down past $100 (IT's not clear which plus since the enquiry never stated the specific asset to write-down). Overall, the Assets side is down away $60.

On the other side, since Net Income was pile by $60, Shareholders' Equity is also down by $60 - and both sides balance.

21. Walk me done a $100 "bailout" of a company and how it affects the 3 statements.

First, confirm what type of "bailout" this is - Debt? Fairness? A combination? The most common scenario Here is an equity investment from the government, so here's what happens:

Nobelium changes to the Income Statement. Along the Cash Flow Statement, Cash Flow from Financing goes up by $100 to meditate the government's investment, so the Profits Change in Cash is up by $100.

On the Proportionality Sheet, Cash is up by $100 so Assets are finished by $100; on the new side of meat, Shareholders' Equity would go up past $100 to get in Libra.

22. Walk me finished a $100 write-off of debt - equally in OWED debt, a financial obligation - on a caller's balance sheet and how it affects the 3 statements.

This is counter-intuitive. When a financial obligation is written down you memorialise it as a gain on the Income Statement (with an plus publish-down, it's a loss) - and then Pre-Tax Income goes finished away $100 due to this write-down. Assuming a 40% tax rate, Ultimate Income is up by $60.

On the Cash Flow Assertion, Net Income is up by $60, but we call for to subtract that debt write-fine-tune - then Hard cash Flow from Trading operations is down by $40, and Net Change in Cash is down by $40.

Along the Balance Weather sheet, Cash is down by $40 indeed Assets are down by $40. Happening the other side, Debt is down past $100 merely Shareholders' Equity is upward by $60 because the Take-home Income was risen by $60 - so Liabilities & Shareholders' Equity is set by $40 and it balances. If this seems oddish to you, you're not alone - see this Forbes article for more on why writing cut down debt actually benefits companies accounting-wise:

http://www.forbes.com/2009/07/31/fair-minded-value-accounting system-markets-equities-fasb.hypertext mark-up language

23. When would a company pull in Cash from a customer and not record it as tax revenue?

Three examples spring to mind:

1. Network-founded subscription software
2. Prison cell phone carriers that cell annual contracts
3. Magazine publishers that sell subscriptions

Companies that jibe to services in the future often pick up cash direct to ensure stable revenue - this makes investors joyous as recovered since they can better call a ship's company's carrying out.

Per the rules of GAAP (Generally Accepted Accounting Principles), you only record tax revenue when you actually perform the services - thus the company would non record everything as revenue far-right gone.

24. If cash collected is not transcribed as revenue, what happens to it?

Usually it goes into the Deferred Tax revenue balance on the Balance Sheet under Liabilities.

Finished time, as the services are performed, the Delayed Taxation balance "turns into" real revenue on the Income Command.

25. What's the difference 'tween accounts receivable and postponed revenue?

Accounts due has not yet been collected in cash from customers, whereas delayed revenue has been. Accounts owed represents how much revenue the company is ready on, whereas deferred receipts represents how much it is ready to record as revenue.

26. How long does it usually take for a ship's company to collect its accounts receivable equilibrise?

Generally the accounts receivable years are in the 40-50 mean solar day range, though it's higher for companies selling high-oddment items and information technology mightiness represent glower for smaller, lower transaction-respect companies.

27. What's the difference between hard currency-founded and accumulation accounting?

Cash-based accounting recognizes revenue and expenses when Cash is actually conventional operating room profitable out; accruement accounting recognizes revenue when assemblage is reasonably certain (i.e. after a client has ordered the product) and recognizes expenses when they are incurred quite than when they are paid out in cash.

Almost large companies role accrual accounting because paying with credit cards and lines of credit is so prevalent these years; very small businesses may habituate cash-based accounting to simplify their business enterprise statements.

28. Let's sound out a customer pays for a TV with a credit card. What would this look corresponding under cash-supported vs. accrual accounting system?

In cash-based accounting, the revenue would not show raised until the troupe charges the customer's recognition card, receives empowerment, and deposits the funds in its banking concern account - at which point it would show dormy as both Revenue on the Profit-and-loss statement and Cash on the Balance Sheet.

In accumulation accounting, it would show up American Samoa Receipts in real time but instead of appearing in Cash on the Residual Sheet, it would enter Accounts Receivable at eldest. Then, once the cash is actually deposited in the company's bank account, it would "turn into" John Cash.

29. How coif you make up one's mind when to capitalize rather than expense a purchase?

If the plus has a useful animation of over 1 class, it is capitalized (put away on the Balance Sheet rather than shown as an disbursement on the Income Statement). Then it is depreciated (tangible assets) surgery amortized (intangible assets) terminated a certain number of years.

Purchases like factories, equipment and land all last longer than a year and therefore show up happening the Counterweight Sheet. Employee salaries and the cost of manufacturing products (COGS) only cover a short period of operations and therefore come on on the Earnings report as normal expenses instead.

30. Why do companies report both Generally accepted accounting practices and not-GAAP (or "In favor Forma") earnings?

These days, many companies have "non-cash" charges such every bit Amortization of Intangibles, Farm animal-Based Compensation, and Deferred Revenue Write-down in their Income Statements. As a result, extraordinary contend that Income Statements under GAAP no thirster reflect how profitable most companies truly are. Non-Generally accepted accounting practices earnings are almost e'er higher because these expenses are excluded.

31. A society has had plus EBITDA for the past 10 years, but it recently went bankrupt. How could this happen?

Several possibilities:

1. The company is spending as well more than connected Capital Expenditures - these are not echoic at all in EBITDA, but it could still be cash-stream negative.
2. The company has high matter to expense and is no more fit to afford its debt.
3. The company's debt altogether matures on one date and it is ineffective to refinance it due to a "liquidity crisis" - and it runs out of cash completely when paying back the debt.
4. It has significant one-time charges (from litigation, for example) and those are high enough to insolvent the company.

Remember, EBITDA excludes investment in (and depreciation of) long-term assets, interest and one-prison term charges - and entirely of these could end up bankrupting the company.

32. Normally Goodwill remains faithful along the Balance Sheet - why would information technology be impaired and what does Goodwill Impairment mean?

Usually this happens when a company has been acquired and the acquirer re-assesses its intangible assets (such as customers, brand, and intellectual property) and finds that they are worth significantly to a lesser extent than they originally thought.

IT often happens in acquisitions where the buyer "overpaid" for the trafficker and arse result in a large final loss on the Income Program line (see: eBay/Skype).

It can too happen when a company discontinues break u of its operations and must spoil the associated good will.

33. Low-level what fate would Goodwill growth?

Technically Goodwill can increase if the company re-assesses its value and finds that information technology is worth more, but that is rare. What unremarkably happens is 1 of 2 scenarios:

1. The keep company gets acquired or bought down and Goodwill changes as a solution, since IT's an method of accounting "stopper" for the purchase price in an learning.
2. The fellowship acquires some other company and pays more than what its assets are worth - this is and so echolike in the Goodwill number.

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Bulddog Inc Income Statement Where to Find Salaries

Source: https://finexecutive.com/en/news/accounting_interview_questions__answers_basic_2_4_2015

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