CMA Part 1 Section A Slides

The Balance Sheet
- Represents a snapshot in time of a company’s financial position.
- Assets and liabilities are presented according to Proprietary Theory.
- Accounts are classified as permanent.

Elements
- Assets: Resources owned by the company.
- Liabilities: Obligations owed by the company.
- Equity: Owner's claim after liabilities are deducted.

Current: Items that are expected to be settled or used within 12 months or the operating cycle, whichever is longer.

Cash: Readily available funds for transactions.
Cash Equivalents: Short-term investments easily convertible to cash.
Receivables: Money owed to the company from customers.
Inventory: Goods available for sale.
Short-term Investments: Investments that are to be converted into cash within a year.
Prepaid Expenses: Payments made in advance for services or goods to be received later.
Current Deferred Tax Assets: Taxes recoverable within the year.

Long-term Investments: Investments intended to be held for more than one year.
Property, Plant, and Equipment (PP&E): Tangible fixed assets used in operations.
Intangible Assets: Non-physical assets such as patents and trademarks.
Long-term Receivables: Money owed to the company due beyond one year.
Restricted Cash: Cash set aside for a specific purpose and not immediately available.
Long-term Deferred Tax Assets: Taxes recoverable after one year.

Accounts Payable: Amounts due to suppliers for goods/services purchased on credit.
Dividends Payable: Dividends declared but not yet paid.
Unearned Revenues: Payments received in advance for services not yet performed.
Collections for Other Parties: Money collected on behalf of others.
Short-term Notes: Loans or debt obligations due within a year.
Current Portion of Long-term Debt: Payments due on long-term borrowings within the next year.
Current Deferred Tax Liabilities: Taxes owed in the upcoming year.

Long-term Notes or Bonds Payable: Debt instruments not due for more than one year.
Long-term Portion of Long-term Debt: Remaining balance of loans not due within the current year.
Warranty Obligations: Expected costs related to warranties offered on products.
Long-term Deferred Revenue: Payments received for services to be delivered over several years.
Long-term Deferred Tax Liabilities: Taxes due beyond one year.

Capital Stock: Total shares issued to shareholders.
Additional Paid-in Capital: Capital received from shareholders above par value.
Retained Earnings: Cumulative profits retained in the company.
Accumulated Other Comprehensive Income: Gains and losses not realized yet, included in equity.
Treasury Stock: Company’s own stock that has been repurchased.
Non-controlling Interests: Ownership interests in subsidiaries not owned by the parent company.

Assesses Liquidity: Ability to meet short-term obligations.
Assesses Solvency: Ability to meet long-term obligations.
Examines Financial Flexibility: Ability to adapt to financial circumstances.
Evaluates Risk: Understanding the financial stability and potential risks faced.

Sales/Service Revenues - Cost of Goods Sold (COGS) = Gross Profit
- Gross Profit - Selling, General, and Admin Expenses = Operating Income
- Operating Income + Interest/Dividend Income - Interest Expense +/- Non-operating Gains/Losses = Income from Continuing Operations before Taxes
- Income from Continuing Operations - Taxes = Net Income

Revenues: Income earned from business activities.
Expenses: Cost incurred to earn revenues.
Gains: Increases in equity from transactions not related to primary operations.
Losses: Decreases in equity from transactions not related to primary operations.

Discontinued Operations: Reporting requirements for shutdown divisions affecting overall profit.
Unusual Gains and Losses: Presented separately on income statements.
Intra-period Tax Allocation: Tax reporting between continuing and discontinued operations.