Wall Street Prep Red Book Complete Study
Guide Questions with expert solutions
What is the primary purpose of US GAAP - answer To standardize
financial reporting and ensure that financials are presented in a fair,
consistent way that protects investors and lenders
Main sections of a 10k - answer Business Overview, MD&A, Financial
Statements, Notes
10-K vs 10-Q - answer 10-K: Annual report with full business overview,
recent performance, risk factors, changing to accounting, and core
financial reports (audited)
10-Q: Quarterly Report, condensed with brief MD&A section and
quarterly financial reports (unaudited)
Income Statement - answer Shows a company's profitability over a
period of time, working from revenue and deducting costs/expenses to
end with net income
Cash Flow Statement - answer Shows a company's cash
inflows/outflows, working from net income to adjust for non-cash items
and changes in working capital for cash from operations, add cash from
, investing and cash from financing activities to end with net change in
cash
Balance Sheet - answer A snapshot of a company's uses (assets) and
sources (liabilities, shareholder's equity) at a specific point in time
Walk me through the income statement - answer Revenue - COGS =
Gross Profit
Gross Profit - SG&A - R&D = EBITDA
EBITDA - D&A = EBIT
EBIT - Interest Expense + Interest Income = Pre-Tax Income
Pre-Tax Income - (Pre-Tax Income * Tax Rate) = Net Income
Walk me through the cash flow statement - answer CFO: Net Income
adjusted for non-cash expenses (D&A, stock-based compensation) and
changes in working capital (accounts receivable, accounts payable)
CFI: Account for CapEx and other acquisitions/divestitures
CFF: Account for fundraising activities (debt/equity issuance), share
repurchases, debt repayment, and dividends
Walk me through the balance sheet - answer Assets: Current assets that
can be converted to cash within 1 year and long-term assets, anything
that can provide economic value in the future
Guide Questions with expert solutions
What is the primary purpose of US GAAP - answer To standardize
financial reporting and ensure that financials are presented in a fair,
consistent way that protects investors and lenders
Main sections of a 10k - answer Business Overview, MD&A, Financial
Statements, Notes
10-K vs 10-Q - answer 10-K: Annual report with full business overview,
recent performance, risk factors, changing to accounting, and core
financial reports (audited)
10-Q: Quarterly Report, condensed with brief MD&A section and
quarterly financial reports (unaudited)
Income Statement - answer Shows a company's profitability over a
period of time, working from revenue and deducting costs/expenses to
end with net income
Cash Flow Statement - answer Shows a company's cash
inflows/outflows, working from net income to adjust for non-cash items
and changes in working capital for cash from operations, add cash from
, investing and cash from financing activities to end with net change in
cash
Balance Sheet - answer A snapshot of a company's uses (assets) and
sources (liabilities, shareholder's equity) at a specific point in time
Walk me through the income statement - answer Revenue - COGS =
Gross Profit
Gross Profit - SG&A - R&D = EBITDA
EBITDA - D&A = EBIT
EBIT - Interest Expense + Interest Income = Pre-Tax Income
Pre-Tax Income - (Pre-Tax Income * Tax Rate) = Net Income
Walk me through the cash flow statement - answer CFO: Net Income
adjusted for non-cash expenses (D&A, stock-based compensation) and
changes in working capital (accounts receivable, accounts payable)
CFI: Account for CapEx and other acquisitions/divestitures
CFF: Account for fundraising activities (debt/equity issuance), share
repurchases, debt repayment, and dividends
Walk me through the balance sheet - answer Assets: Current assets that
can be converted to cash within 1 year and long-term assets, anything
that can provide economic value in the future
