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Corporate Finance 2004-2005 Interview Prep - Accounting

Corporate Finance 2004-2005 Interview Prep - Accounting. Mark Pacyna / Manoj Ramnani VP’s for Corporate Finance Ross Business School Finance Club. Corporate Finance Intern Recruiting Roadmap. Company Presentations and Events Beginning September 20 OCD Resume Reviews / Career Counseling

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Corporate Finance 2004-2005 Interview Prep - Accounting

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  1. Corporate Finance2004-2005Interview Prep - Accounting Mark Pacyna / Manoj Ramnani VP’s for Corporate Finance Ross Business School Finance Club

  2. Corporate Finance Intern Recruiting Roadmap • Company Presentations and Events • Beginning September 20 • OCD Resume Reviews / Career Counseling • September & October • Meet The Interns • November • Corporate Finance Forum • November 5 • OCD Mock Interviews / Interview Preparation • October through early December – Start EARLY! • Finance Club Mock Interviews • Early January • Internship Interviews • Beginning mid-January

  3. Interviewing Basics - Accounting • Use this ONLY as a guideline • This is provided to set expectations for technical Interviews • Will not go into details of accounting and finance • Follow Accounting and Finance classes for best results • Refer to Wet Feet, Vault guides for detailed technical questions

  4. Ratio Analysis – Liquidity Ratios • Current Ratio: • Ability to meet short term financial obligations: Current Assets Current Liabilities • Quick Ratio: • Relatively Liquid Securities: Cash + Marketable Securities + Receivables Current Liabilities • Cash Ratio: • Most Conservative Cash Ratio: Cash + Marketable Securities Current Liabilities

  5. Ratio Analysis – Turnover Ratios • Receivables Turnover: Annual Sales . Average Receivables • Receivables Collection Period: 365 . Receivables Turnover • Payables Turnover: COGS . Average Payables • Payables Collection Period: 365 . Payables Turnover • Inventory Turnover: COGS . Average Inventory • Inventory processing Period: 365 . Inventory Turnover

  6. Ratio Analysis – Risk Ratios • Debt-Equity: • Total Long Term Debt Total Equity • Interest Coverage: • EBIT (Net Income + Interest + Taxes) Interest Expense • Cash Flow/Long Term Debt: • Net Income + Depr. + Change in Deferred Tax Book Value of LT Debt

  7. Ratio Analysis – Operating Ratios • Total Asset Turnover:Net Sales Average Total Assets • Net Fixed Asset Turnover:Net Sales Average Fixed Assets • Equity Turnover:Net Sales Average Equity • Average Equity: • Includes + Common Stock + Preferred Stock + Retained Earnings

  8. Ratio Analysis – Profitability Ratios • Gross Profit Margin:Gross Profit (Sales – COGS) Sales • Operating Profit Margin:Operating Profit (EBIT) Sales • Net Profit Margin:Net Profit Sales • ROE:Net Income Average Total Equity • Return on Owners Equity:Net Income – Preferred Dividend Average Common Equity • ROE:Net Income Average Common Equity • Net Income X Net Sales X Total Assets Net Sales Total Assets Common Equity Profitability X Asset Turnover X Leverage

  9. Ratio Analysis – Limitations • Only useful when compared to other firms or for the company's historical performance • Difficult to find comparable industry ratios when analyzing companies that operate in multiple industries • Must be viewed relative to one another • Best analyzed using a range of acceptable values

  10. Income Statement Sales (Net) - Cost of Goods Sold = Gross Profit - R&D Expense - SG&A Expense = EBITDA - Depreciation & Amortization = EBIT - Interest Expense + Non-Operating Income (Loss) = EBT - Income Taxes - Minority Interest in Earnings + Other Income (Loss) = Net Income Before Ext. Items - Ext. Items & Disc. Ops. - Preferred Dividends = Net Income (available to common)

  11. Balance Sheet - Assets + Operating Cash and Market. Sec. + Receivables + Inventories +Other Current Assets = Total Current Assets + PP&E (Net) + Investments + Intangibles + Other Assets = Total Assets

  12. Balance Sheet - Liabilities + Current Debt + Accounts Payable + Income Taxes Payable + Other Current Liabilities = Total Current Liabilities + Long-Term Debt + Other Liabilities + Deferred Taxes + Minority Interest = Total Liabilities + Preferred Stock + Paid in Common Capital (Net) + Retained Earnings = Total Common Equity

  13. Other Questions • Statement of Cash Flows • Statement of Shareholders Equity • Operating Leases, Capital Leases • Advantages, Disadvantages • Depreciation • Taxation • Elective Classes • ACC 564, ACC 712

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