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Learn/Accounting for investors: earnings quality
LearnAccounting for investors: earnings quality

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B Basic

  • Where profit and cash part ways9m
  • The revenue linePro9m
  • Working capital tells on the income statementPro8m

A Advanced

  • Adjusted earnings and stock compPro10m
  • Capitalize, depreciate, reserve: the judgment linesPro10m
  • The forensic checklistPro11m
  • FlashcardsPro0/15
  • Basic quizPro80% passes
  • Advanced quizPro80% passes
  • Terms

Accounting for investors: earnings quality

0
of 6 lessons
0
of 15 cards
FlashcardsStart the first lesson

How a buy side analyst reads the statements to decide whether reported earnings are real: cash against accruals, the revenue line, working capital, adjusted numbers, the judgment calls management makes, and a checklist that starts a short.

BBasic3 lessons

  1. 1Where profit and cash part waysNet income is an opinion built from accruals. Operating cash flow is closer to a fact. The gap between them, and which way it trends, is the first thing an investor checks.9 min
  2. 2The revenue lineProRevenue is the number most often stretched, because everything below it follows. Know when revenue is recognized, gross versus net, deferred revenue, and billings.9 min
  3. 3Working capital tells on the income statementProReceivables, inventory, and payables are where accruals pile up. Days measures turn them into trends you can compare across quarters and peers.8 min
  4. QBasic quizPro10 questions, 80% passes

AAdvanced3 lessons

  1. 4Adjusted earnings and stock compProManagement's adjusted numbers remove costs it calls unusual. Your job is to decide which removals are fair, and to put stock based compensation back where it belongs.10 min
  2. 5Capitalize, depreciate, reserve: the judgment linesProA handful of estimates management controls can move earnings without changing the business: what gets capitalized, how long assets last, and how big the reserves are.10 min
  3. 6The forensic checklistProHow an analyst works through a filing looking for a short: organic growth, cash conversion, the footnotes that change, and the people who leave. Each finding needs a benign explanation ruled out.11 min
  4. QAdvanced quizPro10 questions, 80% passes