Accounting and Three-Statement Interview Questions
($ in Millions Except Per Share Amounts in $ as Stated)
Assumptions & Model Output
Starting Assumptions: Here's What Happens on the Statements…
Tax Rate: 25% Cash Changes By… $ -
Common Shareholders' Equity Changes By… -
Share Price: $ 1.00 Net Income to Common Changes By…. -
Shares Outstanding (Millions): 1,000 Assets Side Changes By… -
Initial Cash Balance: $ 100 Liabilities & Equity Side Changes By… -
Balance Sheet Still Balanced? OK!
NOL Component of Beginning DTA: 0%
Interview Questions - Possible Scenarios, by Statement
Income Statement Line Items (COGS Handled via Inventory): Operational Balance Sheet Line Items: Cash Flow Statement Line Items:
Revenue Increases By: Accounts Receivable (Linked to Revenue): Sign Operating Leases:
Operating Expenses Increases By: Increases By: Operating Lease Depreciation: -
Decreases By: Operating Lease Principal Repayment: -
Depreciation Increases By:
Stock-Based Compensation Increases By: Prepaid Expenses (Linked to OpEx): Buy Financial Investments Increases By:
Amortization of Intangibles Increases By: Increases By: Sell Financial Investments Increases By:
Decreases By:
Finance Lease Cash Payment Increases By: Capital Expenditures Increases By:
Finance Lease Depreciation Increases By: Inventory (Linked to COGS): Book Value of PP&E Disposals Increases By:
Finance Lease Interest Expense Increases By: Increases By:
Decreases By (This represents a COGS increase): Acquisitions Increases By:
Operating Lease Cash Payment Increases By: % Allocated to Assets:
Operating Lease Interest Expense Increases By: Accrued Expenses (Linked to OpEx): % Allocated to Goodwill:
Increases By: % Allocated to Intangibles:
Interest Income Increases By: Decreases By:
Interest Expense Increases By: Issue Debt Increases By:
Accounts Payable (Linked to OpEx): Repay Debt Increases By:
Gain / (Loss) on Sale of PP&E Changes By: Increases By:
Decreases By: Issue Finance Leases Increases By:
Goodwill Impairment Increases By: Repay Finance Leases Increases By: -
PP&E Write-Down Increases By: Deferred Revenue (Linked to Revenue):
Increases By: Issue Preferred Stock Increases By:
Preferred Dividends Increases By: Decreases By: Repay Preferred Stock Increases By:
Common Dividends Increases By:
Issue New Common Shares Increases By:
Repurchase Common Shares Increases By:
Income Statement Balance Sheet Cash Flow Statement
Current Beginning End of Current Current
Period: of Period: Period:
Before After Current Before After Before After
Changes: Changes: Period: Changes: Changes: Changes: Changes:
Revenue: $ 1,300 $ 1,300 ASSETS: CASH FLOW FROM OPERATING ACTIVITIES:
Cost of Goods Sold (COGS): 100 100 Current Assets: Net Income to Common: $ 300 $ 300
Gross Profit: 1,200 1,200 Cash: $ 100 $ 400 $ 400 Non-Cash Expenses & Other Adjustments:
Accounts Receivable: 100 100 100 (+) Depreciation: - -
Operating Expenses: 800 800 Prepaid Expenses: 100 100 100 (+) Lease Depreciation: - -
Inventory: 100 100 100 (+) Stock-Based Compensation: - -
Depreciation: - - Total Current Assets: 400 700 700 (+) Amortization of Intangibles: - -
Lease Depreciation: - - (+/-) Deferred Income Taxes: - -
Stock-Based Compensation: - - Long-Term Assets: (-) Gain / (+) Loss on PP&E Sale: - -
Amortization of Intangibles: - - Net Property, Plant & Equipment (PP&E): 1,200 1,200 1,200 (+) Goodwill Impairment: - -
Operating Lease Assets: 500 500 500 (+) PP&E Write-Down: - -
Operating Income: 400 400 Finance Lease Assets: 200 200 200 (+/-) Change in Op. Lease Assets: - -
(+) Interest Income: - - Assets from Acquisitions: 200 200 200 (+/-) Change in Op. Lease Liab.: - -
(-) Interest Expense: - - Goodwill: 100 100 100 Changes in Operating Assets & Liabilities:
(+) Gain / (-) Loss on PP&E Sale: - - Other Intangible Assets: 200 200 200 Accounts Receivable: - -
(-) Goodwill Impairment: - - Financial Investments: 100 100 100 Prepaid Expenses: - -
(-) PP&E Write-Down: - - Net Deferred Tax Asset (DTA): 100 100 100 Inventory: - -
Pre-Tax Income: 400 400 Total Long-Term Assets: 2,600 2,600 2,600 Accounts Payable: - -
Accrued Expenses: - -
(-) Income Tax Provision: (100) (100) Total Assets: $ 3,000 $ 3,300 $ 3,300 Deferred Revenue: - -
Cash Flow from Operations: 300 300
Net Income: 300 300 LIABILITIES & EQUITY:
(-) Preferred Dividends: - - Current Liabilities: CASH FLOW FROM INVESTING ACTIVITIES:
Net Income to Common: $ 300 $ 300 Accounts Payable: $ 300 $ 300 $ 300 (-) Buy Financial Investments: - -
Accrued Expenses: 200 200 200 (+) Sell Financial Investments: - -
Common Shares (MM): 1,000 1,000 Deferred Revenue: 200 200 200 (-) Capital Expenditures: - -
Earnings Per Share (EPS): $ 0.30 $ 0.30 Total Current Liabilities: 700 700 700 (-) Additions to Finance Lease Assets: - -
(+) PP&E Sale Proceeds: - -
Tax Schedule: Long-Term Liabilities: (-) Acquisitions: - -
Current Debt: 500 500 500 Cash Flow from Investing: - -
Period: Operating Lease Liabilities: 500 500 500
Before After Finance Leases: 200 200 200 CASH FLOW FROM FINANCING ACTIVITIES:
Changes: Changes: Total Long-Term Liabilities: 1,200 1,200 1,200 (+) Issue Debt: - -
Book Pre-Tax Income: $ 400 $ 400 (-) Repay Debt: - -
(+) Stock-Based Compensation: - - Total Liabilities: 1,900 1,900 1,900 (+) Issue Finance Leases: - -
(+) Amortization of Intangibles: - - (-) Repay Finance Leases: - -
(+) Goodwill Impairment: - - Equity: (+) Issue Preferred Stock: - -
(+) PP&E Write-Down: - - Common Shareholders' Equity: 1,000 1,300 1,300 (-) Repay Preferred Stock: - -
Cash Taxable Income: 400 400 Preferred Stock: 100 100 100 (-) Common Dividends Issued: - -
Total Equity: 1,100 1,400 1,400 (+) Issue New Common Shares: - -
Beginning NOL Balance: - - (-) Repurchase Common Shares: - -
(+) NOLs Created: - - Total Liabilities & Equity: $ 3,000 $ 3,300 $ 3,300 Cash Flow from Financing: - -
(-) NOLs Used: - -
Ending NOL Balance: - - Balance Sheet Balanced? OK! OK! OK! Beginning Cash: 100 100
NOL-Adjusted Taxable Income: 400 400 Increase / (Decrease) in Cash: 300 300
Cash Taxes Payable: (100) (100) Ending Cash: $ 400 $ 400
Deferred Income Taxes: $ - $ -
