Difference between operating lease and financial lease?
An operating lease is treated like renting - payments are considered operational expenses and the asset being leased stays off the balance sheet. At the end of the operational lease…
Is too much goodwill a bad thing?
It means that the company has acquired other entities for a consideration higher than Fair Market Value of Net Assets. Goodwill does not measure synergy, it measures how much I…
Suppose you see goodwill in the balance sheet. What does it mean?
Goodwill arises when a company acquires another entire business. The amount of goodwill is the purchase consideration of the business minus the fair market value of the net assets that…
How to calculate goodwill?
For partnerships, some traditional formulae are used 1. Calculating Goodwill Using Average Profits – Avg profits * no of years. 2. Goodwill using super profits (Actual profit – normal profit)…
What is goodwill?
Goodwill is an intangible asset that arises because of the acquisition of one company by another for a premium value. It is thought to represent the value of a company’s…
Components of cash flows Statement
▪ Cash flow resulting from operating activities.▪ Cash flow resulting from investing activities. ▪ Cash flow resulting from financing activities.
How do you model working capital for a company?
There are three core components of working capital – accounts receivable, inventories, and accounts payable. These items are usually modeled to match what is happening with revenues and cost of…
What is an Ideal leverage ratio?
A figure of 0.5 or less is ideal. In other words, no more than half of the company's assets should be financed by debt. Alternatively, some suggest a 2:1 Debt…
What is Interest Coverage Ratio
One of the most significant interview questions for credit analysts is this one. A business must pay interest when it takes on debt. The interest coverage ratio demonstrates to the…
What are the 4 Cs of the Credit analyst?
The five criteria for credit analysis Character - This refers to a person's subjective assessment of a company's ability to repay a debt. The most crucial of the four characteristics.…
Explain leverage ratio and solvency ratio
A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans) or assesses the ability of a company…
Major difference between Ind As 116 vs As 17.( Just mention 2/3 points)?
Ind AS 17 classified leases as finance leases and operating leases. Ind AS 116 does not make this distinction. When compared to Ind AS 17, Ind AS 116 requires detailed…
Major changes in Ind AS 116
Lessee Accounting: 16 Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than…
What are free cash flows?
FCF is an assessment of the amount of cash a company generates after accounting for all capital expenditures, such as buildings or property, plant and equipment. The Free Cash Flow…
What is Dividend Discount Model?
The Gordon growth model is used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate. Given a dividend…
What is accumulated depreciation?
Accumulated depreciation is the total depreciation for a fixed asset that has been charged to expense since that asset was acquired and made available for use. It is a contra…
Difference between Depreciation, Depletion and Amortization
Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life. It is NOT to reduce the value of the asset due to wear…
What is sin tax
A sin tax is an extra tax levied on certain goods or services deemed harmful to society, for example alcohol and tobacco, candies, drugs, soft drinks, fast foods, sugar, gambling…
Explain valuation and its techniques
Valuation is the process of determining "Value". It ultimately answers the question "What should I pay" for any asset, instrument or a company. Valuation can be categorised based on Relative…
Mention the ERP you have used in budgeting and forecasting?
You can mention the names of any ERPs you have worked on (including Tally) since most have some features relevant to Budgeting and Forecasting. The feature of creating Cost Centres…
How do you make a budget/forecast or what is the basis you consider while making a budget or forecast?
Past data is usually the best starting point for both forecasting and budgeting. An exception is zero based budgeting (where past data is not used). While building a budget, following…
Distinguish between Budgeting and Forecasting?
● Budgeting - Budgeting creates a baseline to compare actual results to determine how the results vary from the expected performance. It is setting a target. It is more relevant…