For question 38 in the morning session:
The answer’s reason is that the balance sheet accruals ratio is negative.
But the cash accruals ratio is positive.
Aren’t these two accruals ratios supposed to mean the same thing? Doesn’t a positive cash accruals ratio indicate that the accruals earnings were greater than cash earnings?
Dont have the mock but high accruals ratio is bad b/c it means more “accruals” and less cash
[NOA End - NOA Begin] / NOA Average
NOA = (Total Assets - (Cash + Marketable Securities)) - (Total Liabilities - Debt)
It is not the same as Cash Accruals …
Still don’t understand this one. BS and CF accrual earnings are supposed to be equivalent in theory, so why is it A when the CF accruals ratio is positive?
Would appreciate it if anyone could shine some light on it for me.
Both CF and BS accruals are conceptually equivalent, but their results might differ because of acquisitions & divestures, exchange rate gains/losses, and inconsistent treatment of specific items on B/S and CFstatement.
When there is a stock based acquisition… it doesn’t flow through CFS… so in such rare cases results might differ for CF and BS accrual ratio…