Financial Reporting Analysis: What to Focus on?

CFA Level I
#1

I have indetified several important issues in FRA:

  1. Calculate CFO, CFI, CFF (direct/indirect)

  2. DuPont decomposition

  3. Interpretation of ratios

  4. Depreciation calculation

  5. Bond amortization

  6. Share buybacks/ diluted EPS

What have I missed? Any ideas, suggestions? P.S. I have really weak performance for FRA (based on Qbank as well as Mock exams, on average - 57%), so I will really appreciate your ideas.

#2
  • Calculation of ratio’s
  • Commonsize Balance sheets
  • Differences between IFRS and GAAP
  • Taxes
  • Inventories (FIFO, LIFO, Weighted average and their differences and be able to convert from one to the other and it’s impact to common ratios)
  • Types of Leases and their impact on the BS/IS/CFS
  • Decomposition of the Balance Sheet
  • Decomposition of the Income Statement
  • Decomposition of the Cash Flow Statement
#3

This list is more comphrehensive. Don’t forget: -Impairment tests and affect on financial statements. -Revenue recognition methods (Percent of completion, completed contract, etc…)

#4

I’ve been told that it’s better to focus on the more technical/advanced readings in study session 9 (inventories, long-lived assets, income taxes, LT liabilities) and less on the financial analysis/ratios readings (accounting shenanigans, red flags, etc) because for those readings, all you have to do is memorize ratio formulas. I’m not sure if this is good advice, but it’s what I hear from other candidates.

#5

I think for me it is nice advice because I am familiar with the ratios, but I am really bad with the advanced concepts (e.x. valuing inventory under perpetuary/periodic systems, taxes, LT liabilities). Thank you!