FAQ MBmbaAnew

8/14/2019 FAQ MBmbaAnew

1/16

Herv Stolowy

12 January 2012

Financial Accounting and Statement Analysis

HEC MBA Program

Frequently Asked Questions and Additional Information

If you dont find the relevant question, dont hesitate to ask a question or make a comment

Send an e!mail to your instructor

ca"kun#hec$fr,hoos#hec$fr or stolowy#hec$fr

List of questions and comments

General questions

%uestion&erms in 'rench

Chapter 2: Introduction to financial statements

%uestion(e)ative endin) cash *alance

%uestion+eanin) of reserves-

%uestion.etained earnin)s, *onus issue and stock "rice

%uestion.ecordin) of de"reciation

%uestionIncome statement ratios%uestion/er"etual and "eriodic inventory systems for finished )oods

%uestionusoni ssi)nment 2$34 increasin) or decreasin) order of liquidity4

dditional information 5orelli ssi)nment 2$64

%uestion5orelli ssi)nment 2$64

%uestionStora7nso ssi)nment 2$84! 1

%uestionStora7nso ssi)nment 2$84! 2

Chapter 3: Financial statements presentation

%uestion5lassification *y nature or *y term in a vertical *alance sheet%uestion(okias alance sheet ssi)nment (okia 9 others4

%uestionenettons alance sheet mid!term test4

%uestion&elefonicas income statement mid!term test4

Chapter 5: Accounting principles and end-of-period adjustments

%uestion(o offsettin) "rinci"le

Chapter 13: Financial fied assets and !usiness com!inations

%uestionInterest in earnin)s of equities
mailto:[email protected]:[email protected]


2/16

Chapter 1": Cash flo# statement

dditional information /ernod .icard ssi)nment 16$64 : ;"dated financial statements and

questions

dditional information /rocter 9 irect method and chan)e in inventory

%uestion5han)e in the sco"e of consolidation

%uestionSchedule of cash flow

%uestionShare "remium

%uestion+inority interests

%uestion/urchase of shares

%uestion>vorak 5om"any .eview 16$14 : /urchase of fi?ed assets

%uestion>vorak 5om"any .eview 16$14 : Sale of fi?ed assets

%uestion>vorak 5om"any .eview 16$14 : 'inancial e?"enses and revenues

%uestion>vorak 5om"any .eview 16$14 : ank overdraft%uestion+itsu*ishi 7lectric .eview 16$24 : /otential cash flow and deferred ta?es

%uestionJanacek 5om"any ssi)nment 16$24 : /rovisions

%uestionJanacek 5om"any ssi)nment 16$24 :


3/16

Questions re!lies and additional information

General questions

Question" #erms in Frenc$

.eadin) @es 7chos- last week, I was confused *y some 'rench ccountin) terms$ >o you

ha""en to have a document which translates the main cate)ories of the various accountin)

documents into 'renchA

%e!ly

Bou will find in the course we* site a multilin)ual )lossary = lan)ua)es, includin) 'rench4$

5ould you tell me if the terms you are lookin) for are not in the )lossaryA

Chapter 2: Introduction to financial statements

Question" &egati'e ending cas$ (alance

5an a ne)ative endin) cash *alance *e shown in the *alance sheet or does it have to *e

matched *y an equivalent overdraft on the lia*ilities sideA

%e!ly

ne)ative endin) cash *alance is always dis"layed as a *ank overdraft in the *alance sheet

within the lia*ilities4$

Question" Meaning of )reser'es*

In a financial statement, whenever we account for .eserves-, is it assumed that its a 5ash

.eserve-A >urin) the discussion in our )rou", there was some confusion if reserves can also

mean money invested *y a com"any-$ Ce think .eserves- and money invested *y a

com"any- are different as .eserves is money thats not even earnin) interest in the *ank-$

re we correct in this hy"othesisA In the class, I remem*er you mentionin) (ever to use

money from reserve for investment-$ /lease let us know$

%e!ly

It is difficult to e?"lain in a few lines the conce"t of reserves$ Have you read the *ook on

"a)es 8= *ottom4 to 8DA Bou have some elements there, which corres"ond to the course$ s I

said, the account reserves- re"resents a "iece of "a"er where the com"any writes that it did

not distri*ute cash for dividends and, consequently avoided a cash "ayment which re"resents

then a savin)4$ s you can ima)ine, there is no cash in a "iece of "a"er$ So the idea of cash

reserve- is strictly im"ossi*le$

Question" %etained earnings (onus issue and stock !rice

In class you said that .etained 7arnin)sE.eserves can *e converted to new shares as a *onus

issue$- Bou said it only has a "sycholo)ical effect$ How does the market see this if a com"any

decides to convert .etained 7arnin)s to new sharesA How does it affect the stock "riceA


4/16

%e!ly

Bour question is very interestin), *ut more relevant for the 5or"orate 'inance course you will

have later in your "ro)ram$ Bou can however visit the followin) link

htt"EEeconomictimes$indiatimes$comEarticleshowE1=21=8D$cms

where you will find a very interestin) discussion on the relationshi" *etween *onus issue and

stock "rice$

Question" %ecording of de!reciation

It is a*out de"reciation$ Bou told us that every transaction has at least 2 im"acts on the

*alance sheet, *ut concernin) de"reciation which is considered as an e?"ense-4, as I

understood, there is only one im"act it reduces the equi"ment value so the assests4$ Should

not this *e followed *y a reduction of the shareholders equityA

%e!ly

&he conce"t of de"reciation is recorded with two im"acts

1 ! >e"reciation e?"ense in the income statement F re"resents a reduction in shareholdersG

equity4

2 ! ccumulated de"reciation which re"resents a reduction of assets4$

Bou can see the dou*le im"act in one of the slides at the end of 5ha"ter 2$

Question" Income statement ratios

t "a)e D0, when lookin) at the different income statement ratios, I )et the im"ression that

(et income, 7I& and income *efore interest and ta? are all the same$ Chen a""lied to case

2$6 that means that the net income is here re"resented *y o"eratin) "rofit-$ Shouldnt the net

income *e equal to the net "rofit for the "eriod-A

%e!ly

Bou are ri)ht concernin) the 7arnin)s *efore interest and ta? 7I&4 and Income *efore

interest and ta? which re"resent e?actly the same conce"t$ However, these conce"ts aredifferent from the (et income$ n "a)e D0, the am*i)uity stems from the fact that we wrote

takin) the e?am"le of the .74 (et incomeEvera)e equity or income *efore interest and

ta?Evera)e equity4$ &he or- does not mean that the conce"ts are strictly alike *ut that there

are two alternative ways to com"ute the .7$ oth definitions will "rovide different *ut

equivalent in terms of financial statement analysis4 ratios$

See the rest of the re"ly *elow4$

Question" Per!etual and !eriodic in'entory systems for finis$ed goods

1E Ce learned a*out "eriodic and "er"etual systems for raw materials$


5/16

1$aE Chat a*out work in "ro)ressA 5ould we use *oth systems for Cork in /ro)ressA >o

you have an e?ercise E an e?am"le to "ractice the work in "ro)ress notionA

1$*E Chat a*out finished "roductsA &hrou)h Schumann e?ercise we saw an accountin)

method that could *e qualified as "eriodic$ 5ould we use a "er"etual method for 'inished

"roducts as wellA >o you have an e?am"leA

%e!ly

Bour question is totally relevant$ I do not cover this issue on "ur"ose, *ecause its too

com"le? for *e)inners and not really useful for financial statement analysis$ Bou have some

elements of e?"lanations at the very end of the cha"ter 2$ &ell me if you need more$ ut I

dont have s"ecific materials, e$)$, e?ercises on this issue4$

Question" Busoni +Assignment ,-./ +increasing or decreasing order of liquidity/

In the e?ercise like usoni one, where we need to show the im"act of the events on the

financial statements with & accounts, do we need to follow an order of liquidityA If we followthe order of the transactions as you )ive us, is it an errorA

%e!ly

Bou can follow any order increasin) or decreasin)4$ ut you must *e consistent within the

order chosen$

Additional information" Corelli +Assignment ,-0/

'ollowin) one )rou"s question, we would like to make clearer that the accounts should *e

related to one column only one family4, *ecause one account is only one "art of a dou*le

entry$ 7?ce"tionally, one account in the list should *e mentioned in two columns4$

Question " Corelli +Assignment ,-0/

.e)ardin) ssi)nment 2$3, there is one "oint I dont understand &he 'inancial >e*t- is

related to @ia*ilities- *ut the @oan- is related to ssets-$ Since a loan is actually also a

financial de*t, for what reason the two are related differentlyA

%e!ly

loan- can *e received then its a de*t4 or )ranted its an asset4$ Ce should "refera*ly use

the term loan- in the second case only$ If there is no s"ecific information, we must assume

that the loan has *een )ranted$

Question" StoraEnso +Assignment ,-1/ 2 3

Chen a""lied to case 2$6 that means that the net income is here re"resented *y o"eratin)

"rofit-$ Shouldnt the net income *e equal to the net "rofit for the "eriod-

%e!ly


6/16

&here is no am*i)uity at this "oint$ &he net income- is equal to the /rofit for the "eriod-

and is totally different form the "eratin) "rofit- which is equivalent, in this case, to the

7I&4$ nce a)ain, you will )et used to these terminolo)ical differences$ &he most im"ortant

is to look at the content of the conce"t4$

Question" Stora Enso +Assignment ,-1/ 4 ,

%uestion 1 of the assi)nment asks us to com"ute ratios for Stora7nso$ ne of these will *e the

cash ratio$ +y question concerns the marketa*le securities of Stora7nso$

5an we consider the shares that Stora7nso has in associated com"anies to *e readily

marketa*leA lso, short!term investments- mi)ht include cash equivalents like *onds to *e

redeemed within the year, *ut it is mi?ed with receiva*les-$ 5an we consider short term

investments and receiva*les- as a cash equivalentA

%e!ly

Short!term investments can reasona*ly *e assimilated to cash and cash equivalents$ Chen

their amount is mi?ed with receiva*les, it is necessary to refer to the notes and search for a

s"lit *etween the two items$ If no information is availa*le, an assum"tion should *e made$

Chapter 3: Financial statements presentation

Question" Classification (y nature or (y term in a 'ertical (alance s$eet

In "re"aration for the midterm e?am, I was lookin) at "ast tests and had a question re)ardin)

classification of *alance sheets as natureEterm$ I came across a vertical *alance sheet wherethe ssets were classified as 'i?ed intan)i*le assets, tan)i*le, investments4 and current

receiva*les, inventory and cash4$ However the vertical *alance sheet did not list financial and

o"eratin) lia*ilities instead listin) current and non!current$ &he answer I saw for this was that

this was a *alance sheet *y term- and not *y nature-$ +y question is does the classification

de"end only on the way the lia*lities are mentionedA &his seems to *e like its *y nature- if

the assets are looked at, and *y term- if the lia*ilities are looked at$ How does one decideA

%e!ly

Bour question is hi)hly relevant$ &he distinction *y natureE*y term a""lies to *oth assets and

lia*ilities$ However, in "ractice, assets are almost4 always classified in the same way,whether *y nature or *y term$ &hats why I said in class that you should concentrate on

lia*ilities *ecause you can only see the difference *y nature vs$ *y term4 with the lia*ilities$

Question" &okia5s Balance s$eet +Assignment &okia 6 ot$ers/

Chy (okias alance sheet is not horiKontal *ut vertical insteadA

%e!ly

&he (okias *alance sheet is vertical *ecause the assets are dis"layed a*ove the lia*ilities, and

not on the left of the lia*ilities$


7/16

Question" Benetton5s Balance s$eet +mid2term test/

Chy is enetton *alance sheet horiKontalA

%e!ly

enetton *alance sheet is horiKontal *ecause

- the assets are dis"layed on a different "a)e from the lia*ilities$ In a vertical format, assets

and lia*ilities always a""ear on the same "a)e, one a*ove the other4$

- as a confirmation, we have the "a)e num*ers indicated$

Question" #elefonica5s income statement +mid2term test/

&he income statement of &elefonica is horiKontal$ >oes it mean that, therefore, no

classification can *e made a*out e?"enses and de)ree of sim"lificationA referrin) to fi)ure

3$8, 5ha"ter 34$

%e!ly

&he horiKontal format is rarely found in "ractice$ &his is why, in 'i)ure 3$8, this "art of the

tree has not *een develo"ed$ However, with a horiKontal income statement, the distinctions

multi"le ste"Esin)le ste" and natureEfunction are "ossi*le$

In the case of &elefonica, we find su*!levels of income e$)$, o"eratin) income4$ &his is a

multi"le ste" format$ &he e?"enses are classified *y nature see the "ersonnel e?"enses4$

Chapter 5: Accounting principles and end-of-period adjustments

Question" &o offsetting !rinci!le

In reference with the no offsettin)- accountin) "rinci"les, in case of dis"utes, can one "lay-

with the lia*ility in favor of to com"ensate dis"uted receiva*les on a )iven su""lier$ He is

not "ayin) me so I do not "ay himL- 'or e?am"le, "rovides a service to and sells "arts

=0 5;4 to inde"endently of this service$ dis"utes the quality or com"letion of the service

e?"ectations were *eyond actual service delivered4 and refuses to "ay the total amount

invoiced 30 5; remainin) due4$ 5an also deduct in retaliation of the "arts "urchased,

*alancin)- its financial statements inde"endently of the contract content and the "urchaseorder "ayin) 20 5; of "arts value4A r is the dis"ute inte)rated under a "rovisionA >oes the

dis"uted amount influence the view, es"ecially when cost to recover is hi)her than amount

itselfA

%e!ly

Chapter 13: Financial fied assets and !usiness com!inations

Question" Interest in earnings of equities

Chat is interest in earnin)s of equity com"any net of dividendsA


8/16

%e!ly

Share of earnin)s of associates affiliated com"anies4$

Chapter 1": Cash flo# statement

Additional information" Pernod %icard +Assignment 30-0/ 4 7!dated financial

statements and questions

- Since the initial writin) of this case study, we u"dated the cash flow statement with the

annual re"ort 2000, 2001 and 2002$ Ce "rovide in the course we*site an e?cel file with

the u"dated cash flow statement$

- &he format ado"ted over the "eriod is consistent with the last years 20024 format$

- &he format has *een si)nificantly chan)ed in 2002$ Some of the questions raised for the

ori)inal case study are no more valid$ Chen necessary, we also "rovide in italics4 an

u"date of the question$- Ce su))est to start the study of the /ernod .icard cash flow statement with a com"arison

of the two formats$

/lease find *elow the list of questions$

1$ Chat does the cash flow- (cash flow from operations in the 2002 version)item in the

o"eratin) activities re"resentA

2$ Chich method is used for com"utin) the cash flow from o"eratin) activitiesA

3$ Chat does the chan)e in workin) ca"ital need- (increase (decrease) in working capitalrequirement in the 2002 version)item in the o"eratin) activities re"resentA

3a. In the 2002 version which concept is missing after the increase (decrease) in working

capital requirement!

3". In the 2002 version which unusual concept is disclosed after the #ash flow from

operations!

3c. In the 2002 version which common concept are not disclosed!

6$ How does the statement *alanceA Is this the traditional method of *alancin) a cash flowstatementA

=$ Cith the hel" of the note accom"anyin) the cash flow statement, restate the final "art of

the statement in order to *alance it with cash and cash equivalents$ +arketa*le securities

are assumed to *e a cash equivalent4$

Additional information" Procter 6 8am(le +Assignment 30-9/ 4 7!dated financial

statements

Since the initial writin) of this case study, we u"dated the cash flow statement with the annual

re"ort 2000, 2001 and 2002$ Ce "rovide in the course we*site an e?cel file with the u"dated

cash flow statement$


9/16

Question" reduction of s$are ca!ital

/a)e =3M of the *ook 1stedition4

Chere in the *alance sheet can I find /ayment on reduction of share ca"ital re"ayment ofshares4A

%e!ly

Bou dont find it e?"licitly$ note is necessary$ However, if, in an assi)nment, there is a

decrease in share ca"ital, it can *e assumed that there was a re"ayment althou)h other

e?"lanations are "ossi*le4$

Question" :irect met$od and c$ange in in'entory

In "a)e =61 1stedition4 you e?"lain how the direct method works$ Im not sure I understand

why chan)es in inventory are taken into account to )et the cost of merchandise sold$ 'or cash

flow "ur"oses, it seems to me that "urchases should Nust *e adNusted with the chan)e in

accounts "aya*le$

In my o"inion, the chan)e in inventory affects the income statement since sometimes you

record "urchases *ut you dont consume all of them and you have to adNust$ ut I dont see

the meanin) here since it doesnt involve cash "ayments$

%e!ly

Bour question is hi)hly relevant$ &here are two hy"otheses, de"endin) on the format$

1 % Format !$ function

&he cost of )oods sold is disclosed$ &he direct method will work this way$

5ost of )oods sold

@ess 5han)e endin) minus *e)innin)4 in inventories in the workin) ca"ital need4

/lus 5han)e endin) minus *e)innin)4 in accounts "aya*le in the workin) ca"ital need4$

F 5ash "aid to su""liers

2 % Format !$ nature &let's ta(e a simple eample #ith merchandise onl$)

/urchases- and 5han)e in inventories of merchandise- are disclosed$

&here are two methods of com"utations

/urchases

O 5han)e in inventories of merchandise

F 5ost of merchandise sold-

@ess 5han)e in inventories in the workin) ca"ital need4/lus 5han)e in accounts "aya*le in the workin) ca"ital need4$


10/16


Bou all notice that the chan)e in inventories is added then su*tracted$ shorter method can

then *e used

/urchasesO 5han)e in inventories of merchandise

F 5ost of merchandise sold-

@ess 5han)e in inventories in the workin) ca"ital need4

/lus 5han)e in accounts "aya*le in the workin) ca"ital need4$


In other words

/urchases

/lus 5han)e in accounts "aya*le in the workin) ca"ital need4$


Question" C$ange in t$e sco!e of consolidation

Chat does it mean *y effective chan)e in the sco"e of consolidation-A

%e!ly

I )uess you mean effect of chan)es in the sco"e of consolidation-$ &his line re"resents the

im"act of the acquisition of a su*sidiary on the cash flow statement$ ;sually it is equal to the

cost of acquisition minus the cash found in the su*sidiary4$

Question" Sc$edule of cas$ flo;

Chy do we need a schedule of cash flowA

%e!ly

schedule of cash flow is not a standardiKed term$ It sim"ly means the detail of the

com"utation of the cash flow$

Question" S$are !remium

Chat is share "remiumA

%e!ly

&he share "remium is the difference *etween the issuance "rice of a share and the nominal

value "ar value4$ See more details in 5ha"ter 11$

Question" Minority interests

Chy is minority interests- considered a non!cash item to *e included in the o"eratin)activities usin) the indirect methodA


11/16

%e!ly

+inority interests re"resent the share of earnin)s of su*sidiaries *elon)in) to minority

shareholders$ It has reduced the net income *ut it is not a real cash e?"ense$ It is then

considered as a non!cash e?"ense$

Question" Purc$ase of s$ares

I Nust want to make sure I did understand well the classification "rinci"le Chen investin) in

another com"any throu)h *uyin) a quantity of shares, this o"eration should *e classified in

investin) activities, and the dividends of this investments in o"eration 5'A

%e!ly

&otally correct$

Question" :'orak Com!any +%e'ie; 30-3/ 4 Purc$ase of fi

when )rantin) a loan, are the revenues from such a loan classified in the o"eratin) 5'

considerin) a normal com"any and not a *ank4A


12/16

%e!ly

&here are several "ossi*ilities see ta*le 16$164$ &he *est solution is to include all the

elements related to the income statement in the o"eratin) cash flow$

Question" :'orak Com!any +%e'ie; 30-3/ 4 Bank o'erdraft

&here are two methods as to how to "erceive an overdraft when "re"arin) the cash flow as

seen in .16$1 the M=0 5; was either incor"orated in financin) activities or considered as

ne)ative cash4$ Chich one would you want us to use in the e?amA

%e!ly

Bou can choose$

Question" Mitsu(is$i Electric +%e'ie; 30-,/ 4 Potential cas$ flo; and deferred ta

current income ta? e?"ense- in the case of +itsu*ishi4 is a cash e?"ense$


13/16

s the deferred ta? e?"ense is a non cash e?"ense, it should *e added *ack to the net income

if it has reduced the net income4 or su*tracted from the net income if it has increased the

"rofit4$ In our case, the deferred ta? e?"ense has increased the net income in 2000 see a*ove4$

It should *e then su*tracted hence the ne)ative si)n4$

Question" =anacek Com!any +Assignment 30-,/ 2 Pro'isions

n no 2$ .econciliation Statement

Is it correct to take "rovisions from the "revious yearA If so, why is this when you take

de"reciation from the "revious yearA

%e!ly

Bou do not take the de"reciation e?"ense from the "revious year *ut the de"reciation e?"ense

from the current$ Bou adNust the net income of year R2 with the de"reciation e?"ense of the

same year4$ &he same e?"lanation a""lies to "rovisions$ &he only difference is that you do

not inte)rate "rovisions linked to current asset4$

Question" =anacek Com!any +Assignment 30-,/ 4 8ain on sale of fi


14/16

>o you calculate )ainEloss on sale of fi?ed assets *y su*tractin) the sales "rice from the *ook

value for the current yearA I would intuitively have thou)ht I should use the reverse, i$e$

Su*tract *ook value from the sales "rice with the difference indicatin) my )ain or lossA

%e!ly

&he )ain on sale is com"uted as follows sales minus *ook value$

&he )ain on sale is then su*tracted *ecause it has increased the net income4 and a loss is

added *ack *ecause it has reduced the net income4$

Question" =anacek Com!any +Assignment 30-,/ 4 Accounts recei'a(le

n no 2$ .econciliation Statement

Cith res"ect to accounts receiva*le, I can see that the fi)ure is ne)ative of the difference

*etween the current and "revious year on the *alance sheet$ I read that this is a ne)ativeim"act u"on cash *ecause it means that less customers have "aid off their trade de*t than new

customers have added to the trade *alance *ut I dont know if I written this down ri)ht or still

understand why the fi)ure is ne)ative$ 5an you hel"A

%e!ly

Bour e?"lanation is correct$ Bou can "ut it another way$ &he chan)e in accounts receiva*le

endin) less *e)innin)4 is "ositive$ It means that we have more receiva*les at the end$ &he

im"act of this evolution on cash is then ne)ative$

Question" Pernod %icard +Assignment 30-0/

I do not understand some "arts of the restated cash flow statement in this instance$ 7)$ Chy is

1PPD cash "rovided *y o"eratin) activities 1P8$D not 1P8$MA Chy is cash used in investment

activities 1PPP !2=3$1 not !2=2$PA Chy is the currency translation effect for 1PPP !83$= and

not !83$DA

%e!ly

&he ori)inal version of the /ernod .icard cash flow statement has some roundin) "ro*lems$

Chapter 15: Financial statement anal$sis

Question" Com!arison of an income statement (y nature and an income statement (y

function

If we want to com"are two income statements, one *y function and one *y nature, is it true

that we can only com"are some *alances, isnitA I mean, in an IS *y function, since we dont

have the 7I&>, will use only the *alances at our dis"osalA

%e!ly


15/16

&his is a*solutely correct$ If you have to com"are an income statement *y nature and an

income statement *y function, you can only take the *alances, which are common to *oth

statements$

Question" %atios (ased on sales

In the ratios found in cha"ter 1= that are related to sales, do we divide *y sales or *y total

"roduction when the information is availa*leA

%e!ly

It is "refera*le to divide *y sales$

Question" Bank o'erdraft +(alance s$eet analysis/

5an we have overdraft in the same time as /ositive 5ash in *alance sheetsA Ive seen this in

assi)nment 1=$6 5lu* +ed4 does that refer to different *ank accountsA

%e!ly

Bes it is not only "ossi*le *ut in reality com"ulsory *ecause of the non offsettin) accountin)

"rinci"le4$ &hat refers to different *ank accounts$

Question" Maintenance e

'rom the solution of review e?am"le 1=$1 +aintenance seems to *e considered as outsourced$

Sometimes, maintenance is done in!house$ &o avoid misunderstandin)s, would you mind

)ivin) more details for such accounts in the e?am$

%e!ly

If maintenance is not outsourced, it will not *e re"orted in the income statement$ It would

"ro*a*ly *e included in the salaries e?"ense4$ In this case, the "ro*lem you mention does not

e?ist in "ractice$ If maintenance it outsourced, it should *e dealt with as e?ternal e?"enses$

Question" E(itda

+y dou*t is a*out the differences of calculatin) the 7I&>$ Chen calculate the 7I&> I*elieve we should also consider the ther "eratin) activities, once its "art of the normal

"rocedure of the com"any and therefore should *e included in the 7I&>$ &he others

o"eratin) revenues are not &a?es, de"reciation, amortiKation so why you do not consider it as

"art of the 7I&>A ctually, I may *e mistaken, *ut I "refer to consider the others

o"eratin) revenues as "art of the 7I&>, once it is "art of the o"eration of the com"any$

ut I know that some "eo"le use the other way$ m I wron)A

%e!ly

oth solutions are "ossi*le$ &raditionally, other o"eratin) revenues are not si)nificant and

therefore not included in the 7I&>$ &hats why, in the income statement *y nature, they


16/16

are disclosed in the o"eratin) income only4$ However, in some com"anies, this item is hi)hly

im"ortant$ In this case, I think you can include it in the 7I&>$

Question" &okia 6 Ericsson +assignment 39-9/ 4 A'erage collection !eriod

In your solution to (okia assi)nment, you com"uted avera)e collection "eriod usin)receiva*les at end of year and not the avera)e receiva*les *e)innin) O endin) E24, while it is

stated in the ratio definitions as the avera)e of the receiva*lesA Is it a fle?i*le definitionA In

year 1PPP, it chan)es from P0 days to MD days$ Chat should we use in the e?amA

%e!ly

oth solutions are acce"ta*le$

Documents

FAQ MBmbaAnew