turns listlengths 2 2 | question_id int64 0 92 | uid stringlengths 8 8 | references listlengths 2 2 |
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[
"What is the difference between an Annuity and IRA?",
"What are the tax implications of an Annuity?"
] | 0 | 4d347d86 | [
"Both individual retirement accounts (IRAs) and annuities provide tax-advantaged ways to save for retirement, but there are distinct differences between the two. IRA is not in itself an asset. It's a vehicle for holding financial assets stocks, bonds, mutual funds. Annuities are assets specifically insurance produc... |
[
"What is the difference between FRS 105, the Financial Reporting Standard applicable to the Micro-entities Regime and FRS 102, The Financial Reporting Standard applicable in the England and Ireland?",
"You advise a client who is in the process of incorporating a fast growing UK-based technology company. The compa... | 1 | b7559f23 | [
"FRS 105, is a simplified version of FRS 102 that's specifically designed for micro-entities. These are the smallest businesses, with relatively low turnover and limited financial complexity. FRS 105 allows them to prepare their accounts in a less time-consuming and burdensome way while still meeting the basic lega... |
[
"Kensho gave laptops to its new team members in Pakistan on August 1st 2023 at a cost of $10000 each. The average life of the laptop according to the company's policy is 5 years and then they can be sold for $500 in scrap.\n\nOn 31 July 2024, the team will have completed their one year. What would be the depreciati... | 2 | 07a03530 | [
"# Straight line method\nValue of the laptops = $10000\nScrap value = $500\nNet = $10000 - $500 = $9500\nThe useful life of laptops = 5\n\nAnnual depreciation = $9500 / 5 = $1900\n\nThe annual depreciation of $1900 will remain the same for both years 2024 and 2025.\n\n| Year | Depreciation | Remaining Value |\n|---... |
[
"Bob financed his home purchase with a $500,000 5/1 ARM mortgage with a 5/2/6 cap. The breakdown of his initial monthly mortgage costs is as follows:\n\n(P&I): $2,108.62\nInsurance: $250\nTaxes: $500\nAdjustable Rate Formula: SOFR + 3%\n\nBob's initial interest rate was 3%; at the time, SOFR was 2%. Today, Bob's in... | 3 | ea7a9d10 | [
"Yes, this information is sufficient to determine the current SOFR value.\n\nThe first step is to determine the new P&I payment:\n$3,638.95 - $250 - $550 = $2,838.95\n\nThe next step would be to determine the current interest rate on the mortgage (I). While this can't easily be solved algebraically, we can plug var... |
[
"I purchased 1000 shares of Microsoft at the beginning of 2024 when their price was $180. I wanted to protect myself from a fall in the value of the shares, so I purchased a put contract for $5 with an exercise price of $200. Today the share price is $150.\n\nWhat is my potential profit from these shares?",
"I al... | 7 | f427178c | [
"# Microsoft\n\nThe spot price today is $150 whereas the option contract allows an exercise price of $200. Therefore, the option contract is more valuable so it will be exercised.\n\nIncome from sale of shares = $200 * 1000 = $200,000\n\nPurchase price of share = $180 * 1000 = $180,000\n\nOption contract cost = $5 ... |
[
"What is the expected return of a stock according to the CAPM model?",
"Our company recently completed divesting some of the spare assets 2 months ago, which has caused in increase in the volatility of our returns from 30% to 40%; however, the correlation of our stock's returns with the market has risen from 0.5 ... | 8 | 5c09dedb | [
"The expected return of a stock can be calculated using the CAPM formula, which is as follows:\n\nE(R) = rf + β (rm - rf)\n\n- rf is the risk-free return\n- rm is the market return\n- β is the beta which is the volatility in the return of a stock compared to the market.\n\nand \n\nBeta = Correlation (Ri - Rm) * ... |
[
"According to IFRS, how should a company record the value of its inventory for accounting purposes?",
"One of the companies in my portfolio manufactures pharmaceutical products. The company had an inventory of vaccines of $1,000,000. On June 1, 2024, it was now estimated that this inventory could be sold for $1,2... | 9 | ba417013 | [
"According to the IFRS standard for accounting for inventories IAS 2, the inventory should be recorded at the lower of cost and net realisable value where the net realisable value is the selling price minus selling costs.",
"# Valuation on June 1, 2024\n\nInventory valuation (Carrying amount in the books) = $1000... |
[
"ABC Co purchased an item of property, plant, and equipment for $10 million on January 1st 2020. The useful economic life was estimated to be five years. \n\nOn December 31st 2020, the asset was revalued to $12 million. \n\nExplain, with suitable calculations, how the above transactions should be dealt with in the ... | 10 | ad608f63 | [
"IAS 16 Property, Plant, and Equipment state that revaluation gains on property, plant, and equipment are recorded in other comprehensive income (OCI) and held in a revaluation reserve in equity (other components of equity). Revaluation losses are charged to OCI to the extent that a revaluation reserve exists for t... |
[
"Let's say I sell a product for $100 on credit. Which will be impacted first, operating income or cash flow for operations?",
"| Metric ($M) | 2022 | 2023 |\n|--------------------|--------|--------|\n| Retained Earnings | 185 | 210 |\n| Receivables | 48 | 59 |\n| Inventory |... | 12 | a6d55bb4 | [
"Cash flow from operations measures the cash generated by a company’s core business activities, while operating income measures the profit earned from those operations. For example, if you sell an item for $100, that sale can be recorded as revenue immediately. However, it won't affect actual cash flows until the p... |
[
"Which IFRS standard deals with the recognition of assets acquired through the merging of two business? What is the standard for intangible assets?",
"On 1 January 2023, Jay's Perfume LLC acquired 100% of Tims Co. Both companies operate in the perfume sector. Jay's Perfume LLC intends to merge the manufacture of ... | 13 | 2c08fef6 | [
"IFRS 3 Business Combinations. This states that the acquirer must recognize identifiable intangible assets acquired in a business combination separately from goodwill. To be identifiable, the asset must be separable or arise from contractual or legal rights.",
"The Tims Co is intangible because it has no physical... |
[
"What is the requirement for impairment of an asset under GAAP?",
"What are the differences in accounting for impaired Assets under IFRS and GAAP?"
] | 14 | 4e690e46 | [
"In accounting, impairment is a permanent reduction in the value of a company asset. It may be a fixed asset or an intangible asset. When testing an asset for impairment, the total profit, cash flow, or other benefits that can be generated by the asset is periodically compared with its current book value. If the bo... |
[
"What is the main difference between how you handle impairment losses for patents under IFRS and US GAAP?",
"Our company has several patents that are recorded as a cost of $250 million in the 2023 balance sheet, with an accumulated amortisation of $25 million. Moreover, their accumulated losses from impairment ar... | 15 | c541ae08 | [
"# IFRS\n\nUnder IFRS, the impairment losses previously recognised can be reversed, therefore, the value of the patents will get an increase equal to the reversals.\n\nValue of the patents = cost - accumulated amortisation - impairment losses + impairment reversals\n\n# US GAAP\n\nAccording to the US GAAP, the impa... |
[
"An investor is considering investing $100,000 in bonds. One potential option is a 3 years fixed-rate bond paying semiannual coupon of 5%. The bond is available for purchase at $930 per $1000.\n\nWhat is the yield to maturity of this bond (on an annual basis)?",
"There is another option on the market, a 3 years 5... | 16 | c11c400e | [
"Yield to Maturity is the expected return on a bond if the bond is held till the time it matures. \nThe yield to maturity can be found using the following formula: \nPrice = Coupon (1+YTM) ^ -1 + Coupon (1+YTM) ^ -2 + .... + (coupon + face value) (1+YTM) ^-n\n\n\nThe yield to maturity of the fixed rate bond can be ... |
[
"There are three options available in the market, one is call with an exercise price of $90. The second option is a put option with an exercise price of $100. The third option is a call option with an exercise price of $110. \n\nWhich of them will have the highest value if the underlying of these options has a valu... | 17 | 51de7010 | [
"# Option 1\n\nCall option with an exercise price of $90\nValue of the call option = Spot at expiration - Exercise price\nValue of the call option = $90 - $90 = 0\n\n# Option 2\n\nPut option with an exercise price of $100\nValue of put option = Exercise price - Spot price at expiration \nValue of put option = $100 ... |
[
"What are the differences between: a Private Offering, a Best Effort Offering, Firm Committment Underwriting or All or None Underwriting.",
"Let's say we want to go with a best effort offering. Last year, we issued 50,000 shares and our desired price was $150 but we ended up selling only 35,000 shares. We lowered... | 18 | 976eb334 | [
"There are different types of offerings in which investment banks assist including private offering, best effort offering, firm commitment and all or none. The following is the expected amount of capital that can be generated in each of the cases.\n\n# Private Offering\n\nIn the private offering, the shares are sol... |
[
"Imagine two bonds. One is a 3.50% annual coupon bond which is currently trading at 102.55 in the market with a maturity of three years. The other bond is a 7.25% annual coupon bond which is currently trading at 122.4 and has a maturity of 5 years. What is the YTM of these bonds?",
"Our investment banking firm i... | 19 | 630f8662 | [
"YTM of a bond can be calculated using the following formula\n\nP = C/(1+r)^-1 + C/(1+r)^-2 + ... + (C+F)/(1+r)^-n\nwhere p is the price at which the bond is currently trading, C is the coupon payment on the bond, F is the future value at which the bond will be redeemed at maturity, n is the number of periods from ... |
[
"My company purchased some bonds worth $69,000 that pay a 10% coupon semi-annually on January 1 2024. At the end of six months on June 30 2024, I checked the market and realized that interest rates have fallen and the value of these bonds has increased. The bonds that I purchased are now trading at $100,000. I have... | 20 | 52f2fe34 | [
"# The Available Treatments According to IFRS\n\nAccording to IFRS, there are three ways in which the financial instruments can be recorded in the financial statements.\n\nThe three treatments are as follows:\n\n## Method 1. Cost or amortized value\n\nThis treatment is followed in the following conditions:\na. debt... |
[
"My hedge fund had capital of $500 million at the start of the January 2024. During the year, I borrowed $200 million from William capital management LLC at 12%, and $100 million from James Capital LLC at 8%. I charge a 10% management fee based on the year-end assets under management after accounting for trading co... | 22 | ddec45b7 | [
"Capital of investors at 1 Jan 2024 $500,000,000\nBorrowed from William $200,000,000\nWilliam interest rate 12%\nBorrowed from James $100,000,000\nJames' interest rate 8%\nTrading costs (2% of AUM) 2%\nGross return 35%\nManagement fee 10%\nTaxation 18%\n \nStep 1 - Assets under management at period end \nAssets und... |
[
"What is the formula for NPV?",
"I have two investment opportunities to invest my $950. My required rate of return is 5%. The first opportunity returns $370.5 for the next three years whereas the second opportunity provides $427.5 in the first year, $370.5 in the second year and $304.0125 in the third year. \n\nW... | 23 | a31b1616 | [
"NPV = (C1 / (1 + r)^1) + (C2 / (1 + r)^2) + ... + (Cn / (1 + r)^n) - C0\n\nC1, C2, C3 ... Cn = the cash flows in each of the years.\n\nC0 = the initial cash flow \n\nr = the required rate of return.",
"These investment opportunities can be evaluated by comparing their present values.\n\n# Opportunity 1\n\nNPV = ... |
[
"Our startup company W&J Global purchased networking equipment at the beginning of 2024 for $6,690,055. We use a 10% depreciation method for our fixed assets; however, the taxation authority in our country requires the depreciation of network equipment at 14.9% per year. The taxation rate in our country is 39%. \n\... | 24 | a82fa11d | [
"The yearly depreciation for accounting purposes will be 10% of $6,690,055.00, or $669,005.50.\n\nEnding Carrying Amount = Opening carrying amount - Depreciation\n\n| Accounting | | | |\n|---------------------------|--------------|--------------|-------------... |
[
"How is the cash conversion cycle calculated? What does it measure?",
"| | 2023 | 2022 |\n|----------------|-------------|-------------|\n| Sales | $450,354.00 | $850,105.00 |\n| Cost of Sales | $315,247.80 | $595,073.50 |\n| Receivables | $22,517.70 | $42,505.25 |\n| Inve... | 25 | f9fb3ada | [
"The cash conversion cycle (CCC) also called the net operating cycle or cash cycle, is a metric that expresses, in days, how long it takes a company to convert the cash spent on inventory back into cash from selling its product or service. The shorter the cash cycle the better, as it indicates less time that cash i... |
[
"Salman currently owns a single share of Amazon (which does not pay any dividend), and which is currently trading at $194 as of July 12, 2024. He has entered into a contract to sell these shares forward to a broker at a price of $220 on January 12 2024, six months from now. \n\nWhat will be the value of this contra... | 26 | 779f1434 | [
"At the beginning of the contract, the value of the contract will be zero. So, on July 12 2024:\nValue of the forward contract for Salman = 0 \nValue of the forward contract for broker = 0 \n\n\nThe value of a forward contract at maturity is calculated using the following formulas:\n\n# Selling party \nValue of the... |
[
"How do IFRS 9 and FRS 102 differ in their treatment of impairments for debt instruments?",
"HCB purchased a debt instrument in the current reporting period that is measured at amortized cost. By the reporting date, no actual defaults had occurred. However, due to a general economic decline, the directors of HCB ... | 27 | 0e7c0684 | [
"IFRS 9 Financial Instruments applies to debt instruments at amortized cost or fair value through other comprehensive income (FVTOCI), lease receivables, contract assets, and certain written loan commitments and financial guarantee contracts. The impairment model focuses on assessing credit risk and recognizing exp... |
[
"What is the relationship between Receivable Days and Receivable Turnover? What do they measure?",
"Our company currently has an average days of receivables of 29 days, whereas the industry average is 25 days. We currently have sales of $400 million and in the next year, we expect the sales to increase by 10%.\n\... | 28 | 484f4435 | [
"# Formulas\n\nThere are two key formulas:\n\nReceivables Turnover = Sales / Receivables \n\nand \n\nReceivables Days = 365 / Receivables turnover\n\nBoth metrics are trying to measure the rate at which companies collect payments for their goods and services. Receivable Days is a direct approximation of the number ... |
[
"Amazon had sales of $1,389,900 million with cost of sales of 75% in 2023. Moreover, its inventory in 2023 was $253,999 million and $234,975 million in 2022. What is Amazon's inventory turnover?",
"Walmart had sales of $2,859,485 million with the cost of sales of 65% in 2023. Moreover, its inventory in 2023 was $... | 29 | 5e407211 | [
"Inventory turnover = Cost of sales / average inventory in the year\n\n# Amazon\n\nInventory turnover = Cost of sales / average inventory in the year\n\nCost of sales = 75% of 1,389,900 = 1,042,425\n\nAverage inventory = 1/2 *($253,999 + $234,975) = 244487\n\nInventory turnover = $1042425 / $244487 = 4.26\n\nAmazon... |
[
"What is the difference between a defined benefit plan and a defined contribution plan?",
"Matt has a defined contribution pension scheme. However, during the year, he introduced a new post-employment plan (the Fund) for its employees as a way of enhancing the benefits they will receive when they retire. Matt mak... | 30 | 8704e393 | [
"A defined benefit plan and a defined contribution plan are two types of retirement plans with distinct differences:\n\n# Defined Benefit Plan:\n- Employer promises a specific benefit amount to employees based on a formula, typically considering salary and service years.\n- Employer bears investment risks and guara... |
[
"How do you compute the value of a bond based on its:\n\nC = coupon payment per period\nr = market interest rate\nn = Number of Coupon Payments in A Year\nt = Number of Years until Maturity\nF = the face value of the bond",
"William is a portfolio manager whose investment strategy is primarily in bonds in an emer... | 31 | 2a84c5f7 | [
"Using the variables you provided, you can compute intrinsic value of a bond using the following formula:\n\nBond Price = C * [1-(1+r/n)^-n*t] / r/n + (F / (1 + r/n)^n*t",
"Using this formula, following are the intrinsic values of the bonds.\n\nBond 1. $1047 (under-priced)\nBond 2. $1070 (over-priced)\nBond 3. $1... |
[
"How do you compute the standard deviation of a portfolio with two stocks?",
"James has a portfolio of two companies, Kensho and Bloomberg. He has invested $60,000 in Kensho and $40,000 in Bloomberg. Based on past performance Kensho has had a standard deviation of 19% in its returns whereas the standard deviation... | 32 | 4cc2aad4 | [
"# Formula\n\nThe standard deviation of a portfolio can be found by calculating the variance of a portfolio and squaring it. The formula of variance of a portfolio is as follows:\n\nPortfolio variance σp² = w1²σ1² + w2²σ2² + 2w1w2 Covariance(R1,R2)\n\n- σp² = the variance of the portfolio \n- w1 = the weight of the... |
[
"How do you determine if convertible bonds are dilutive?",
"The profit after interest and tax of PK in the year 2023 was $300 million (its tax rate was 40%). Moreover, it had common shares outstanding at the beginning of 2023 of 40 million. During the year 2023, it issued 10 million shares in May, 2 million in Ju... | 33 | 844d3929 | [
"To determine whether convertible bonds are dilutive, the Basic EPS and diluted EPS need to be compared. If the diluted EPS is greater than the basic EPS, it means that the convertible does not have a diluting effect on the earnings. You can compute the Basic and Diluted EPS as follows:\n\n# Basic EPS: \n\nBasic EP... |
[
"William is the sole owner of Catco. On its balance sheet, Catco has the following assets:\n\nCash: $30,000 \nAccount Receivable: $20,000\nOffice Building: $100,000\nWarehouse Building: $30,000\n5 Trucks($4,000 each): $20,000\nOffice Equipment: $30,000\nWarehouse Equipment: $20,000\nInventory: $50,000\n\nCatco also... | 34 | 5e649992 | [
"$300,000 (assets) - $120,000 (liabilities) = $180,000\n\nThis $180,000 represents William's stake in Catco. That is, his financial interest in the business.",
"Debt financing involves out loans or issuing bonds to raise capital. Importantly, businesses can deduct the interest paid on these obligations from their... |
[
"What is the loan-to-value (LTV) ratio for Class A of the following structured finance securities? Assume a loan amount of $407 million and an as-is appraised value of the underlying securities of $550,750,000. Also, keep in mind that the total required credit risk retention percentage (RR interest) for this transa... | 35 | 9be15d66 | [
"1.) The total loan amount is $407 million.\n2.) The as-is appraised value of the underlying collateral is $550,744,248.99.\n3.) The required RR interest (credit risk retention) is 5.00% of the total loan amount, or 20,350,000. \n\nThe RR interest represents the portion of the loan that the sponsor retains in order... |
[
"A portfolio has exactly three stocks (one share each) in it. Amazon's stock was priced at $153 at the start of 2023 and $190 at the end of the year. During the year it paid a dividend of $0.75. Walmart's stock was priced at $562 at the start of 2023 and $590 at the end of the year. During the year it paid a divide... | 36 | 2245e388 | [
"Price return = (VP1 - VP0) / VP0\n\nwhere:\n- VP1 = end price\n- VP0 = initial price\n\n## Amazon\n\nIndividual price return = ($190 - $153)/$153 = 24.18%\n\nWeight in the portfolio = 1/3\n\nContribution to the portfolio price return = 24.18% * 1/3 = 8.6%\n\n## Walmart\n\nIndividual price return = ($590 - $562) /... |
[
"What is a two-stage discount model for valuation?",
"I am trying to value a stock in my portfolio. The stock paid a dividend of $5 recently. Based on the most recent earnings call, I expect the dividend will keep on growing for the next 5 years at a rate of 10% per year and then have a constant growth rate of 2%... | 37 | bd1f59da | [
"A two-stage discount model is a method used in finance and economics to value a company or project by applying different discount rates to different phases or stages of its cash flows. \n\nIn the initial stage, the company or project is expected to experience high growth. This phase might reflect early development... |
[
"Assume we have a commercial mortgage loan with the following terms:\n\nLoan amount: $400 million.\nLoan type: Floating Rate\nLoan term: 2 years, with 3 1-year extension options\nInterest rate: SOFR +3.25%.\nInitial SOFR Cap (Strike): 8.00%\nExtension period terms: If the borrower extends the loan after the initial... | 39 | 9897d61c | [
"To answer this question, we need to take the \"Extension period terms\" into consideration.\n\nGiven that SOFR is now at 9%, the borrower's current interest rate is:\n8% (Cap) + 3.25% = 11.25%\n\nThis rate would result in an annual debt service of:$400,000,000 * 11.25% = $45,000,000 \n\nThis debt service would res... |
[
"What is the difference between an operating lease and a financial lease?",
"Rafay is a lessor and is drawing up a lease agreement for a building.\nThe building has a remaining useful life of 50 years. The lease term, which would commence on 1 January 2020, is for 30 years.\nRafay will receive 40% of the asset's ... | 40 | 25f0592b | [
"Operating Lease:\n- The lessee uses the asset for a specific period, usually less than the asset's economic life.\n- The lessor retains ownership and risks.\n- Lease payments are expensed as operating expenses.\n- No asset or liability is recorded on the lessee's balance sheet.\n\nFinance Lease:\n- The lessee uses... |
[
"What is the formula for a continuously compounded return?",
"The stock price of Microsoft went from $109.86 to $138.78 in 2024. Amazon’s stock jumped from $88 to $129 and Meta’s stock increased from $152 per share to $177. Which stock had the highest continuously compounded return?"
] | 41 | 2acf7cbd | [
"# Formula\n\nContinuously compounded return can be calculated using the following formula\n\nContinuously compounded return = rt,t+1 = ln[P1 / P0]\n\n- rt,t+1 is the continuously compounded return.\n- P1 is the price at the end of the period.\n- P0 is the price at the beginning of the period.",
"# Microsoft\n\nP... |
[
"Assume ABC Pvt. Ltd. sold 2,000,000 goods, each having the selling price of $50 and cost of $20. ABC pvt. ltd. recorded its receivables of $50,000 and payables of $30,000. The company went into some legal dispute, due to which it had to pay an additional fee of $40,000 to settle the dispute. The company recorded i... | 42 | da1c2b32 | [
"The Operating Profit of ABC Pvt. Ltd. is calculated as follows:\n\n Calculation\nSales 2,000,000 x $50 = 100,000,000\nCost of Goods Sold 2,000,000 x $20 = (40,000,000)\nGross Profit 100,000,000 - 40,000,000 = 60,000,00\n\nOperating Expens... |
[
"What is the IFRS 16 treatment of short term or low value leased assets? What are the restrictions?",
"On April 1st 2023, Abigail acquired telephones for her salesforce under a two-year lease agreement. The terms of the lease require an initial payment of $3,000, followed by a payment of $9,000 on March 31st 2024... | 43 | ba3f2816 | [
"IFRS 16 Leases permit a simplified treatment for assets with a lease period of 12 months or less, or of low value. Although the standard does not give a numerical definition of 'low value' it does give examples of the types of assets that may be included, and this includes telephones. The simplified treatment allo... |
[
"Compare and contrast the cost, equity and consolidation method of reporting ownership interest between companies.",
"What are the requirements for accounting of consolidated financial statements?"
] | 45 | 3d25ac25 | [
"There are primarily three ways to report ownership interest between companies. The first way is to create consolidated subsidiary financial statements. The cost and equity methods are two additional ways companies may account for ownership interests in their financial reporting. Ownership is usually based on the t... |
[
"What is the relationship between Net Present Value (NPV) and Internal Rate of Return (IRR) in capital budgeting?",
"Let's say I have an investment opportunity that will cost $100, but will generate $20 at the end of the first year and will grow 10% per year in perpetuity onwards. What is the IRR of this opportun... | 46 | 6e47b1bd | [
"Capital budgeting also known as investment appraisal is a process that businesses to evaluate major projects. The process involves analyzing company's cash inflows and outflows to check whether expected return meets the benchmark. Two major techniques used for this are Net Present Value (NPV) and Internal Rate of ... |
[
"At the end of the year 2022, Party A sells $1,000,000 worth of corporate bonds to Party B with an agreement to repurchase them later. The agreed repurchase price is $1,020,000 after one year.\n\nParty A receives $1,000,000 in cash from Party B in exchange for the corporate bonds. Party A pays interest to Party B f... | 47 | 27e12c27 | [
"# Party A’s Financial Statements for the year 2022:\n\n1. Impact on Income Statement: \n\nThe selling of corporate bonds would have no impact on the Income Statement of Party A as it would not generate any revenue from sales of goods or services. It is just a transaction of financial instruments. \n\n2. Impact on ... |
[
"What is the difference between a bond's duration and convexity? How do you use these values to estimate the price change from a change in yields?",
"James is a bond portfolio manager at Kentech. He is worried about the impact of changes in the yields on the prices of his bonds. \n\nOne of his bonds was issued by... | 48 | c104f63a | [
"# Definitions\n\n## Modified Duration\n\nA mathematical formula that measures how much a bond's value changes in response to a 1% change in interest rates\n\n## Convexity\n\nConvexity is the curvature in the relationship between bond prices and interest rates.\n\n## Difference\n\nBond-modified duration and convexi... |
[
"How do you compute the present value of an annuity with a fixed number of periods?",
"I am considering purchasing a home on a 20 year mortgage. The house currently costs $1,500,000 but I can only contribute $200,000 right now. Three financing companies have provided me with their financing plans. I want to choos... | 50 | 97d2048d | [
"The following formula can be used to value these annuities:\n\nPV = p x ((1 – (1 + r) ^{-n}) / r)\n\nwhere:\np = payment per period\nr = interest/discount rate\nn = number of periods remaining",
"Since the payments will be made every month, they will be accounted for as annuities. Instead of computing PV, we can... |
[
"As Per IAS 12, when can a deferred tax asset be recognized?",
"The directors of Swirl wish to recognize a material deferred tax asset in relation to $250 million of unused trading losses that have accumulated as of 31 December 2022. Swirl has budgeted profits for $80 million for the year ended 31 December 2023. ... | 52 | 1e4e1cae | [
"IAS 12 Income Taxes says that a deferred tax asset shall be recognized for the carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized.",
"Deferred tax asset... |
[
"The following numbers are pulled from the filings of a manufacturing company. All numbers are in millions of dollars.\n\n| Year | Debt | Equity | \n|------|------|--------|\n| 2021 | 3.5 | 10 |\n| 2022 | 3.8 | 9 |\n| 2023 | 4 | 8 |\n\n\nBased solely on debt-to-equity, how has the solvency of the... | 53 | cf7207e8 | [
"The solvency of a company can be approximated by calculating the ratio of debt to equity.\n\n# 2023\n \nDebt to equity = $4,000,000 / $8,000,000 = 0.5\n\n# 2022\n\nDebt to equity = $3,800,000 / $9,000,000 = 0.42\n\n# 2021\n\nDebt to equity = $3,500,000 / $10,000,000 = 0.35\n\n\n\nThe debt to equity of the company ... |
[
"What is the Pecking Order Theory for capital structure?",
"Alex is a manager in LMN Limited's finance department. LMN is expanding its operations into a new city, and Alex is responsible for raising $10 million in order to execute this project. The company has taken loans in the past and has a good credit histor... | 54 | f448163d | [
"Pecking Order Theory states that managers follow a hierarchy when selecting the sourcing of funding. Managers first consider internal retained earnings to fund investment opportunities followed by debt and then equity in the last. \n\nEquity financing involves the raising of funds through sale of company's shares.... |
[
"A client of mine purchased a home in LA. They purchased the property for $1,000,000 with a down payment of $200,000. Their current mortgage rate is 8% with a 30-year fixed term, and the remaining principal balance is $790,000. What is their current monthly payment?",
"Since purchasing the home last year, mortgag... | 55 | c345d6de | [
"Current Mortgage Payment:\nPurchase Price — $1,000,000\nDown Payment — $200,000\nAmount Financed — $800,000\nRate — 8.00%\nTerm — 360 months\n\nUsing M = P × (r(1 + r)^n) / ((1 + r)^n - 1), we can determine that the current P&I payment is $5,870.12.",
"To answer this question, we must determine:\n\n1.) The curre... |
[
"What are the formulas for Sharpe ratio, Treynor's ratio and Jensen's alpha?",
"Nick and Harry are two portfolio managers who have diversified portfolios. Their portfolios performed as follows: \n\nNicks' portfolio returned an 18% annualized return in 2023 with a standard deviation of 16% and a beta of 0.8. \n... | 56 | 04e43b84 | [
"The formulas of the ratios are as follows: \n\nSharpe Ratio = (Rp - Rf) / σp \nRp = Return of the portfolio \nRf = Risk free return \nσp = Standard deviation of the portfolio \n\nTreynor’s Ratio = (Rp − Rf) / βp \nRp = Return of the portfolio \nRf = Risk free return \nβp = Portfolio Beta \n\nJensen's Alpha = Rp -... |
[
"How are payback periods used in capital budgeting?",
"We are considering investing in a facility with an initial outflow of 500,000. The project is expected to generate cash flows of 100,000 in the first year, with an annual growth rate of 7% for the next 5 years. Assuming a discount rate of 3%, how long will it... | 57 | 337b80f8 | [
"The payback period is the expected amount of time for an investment to generate returns that exceed its costs. A payback investment rule will normally define a timeframe that a payback period must meet. For example, a firm could decide to only invest in projects that will break even after four years.",
"The init... |
[
"Assume that a CMBS securitization consists of 5 loans:\nLoan 1: $300,000,000 (35% out of trust)\nLoan 2: $250,000,000\nLoan 3: $100,000,000\nLoan 4: $75,000,000\nLoan 5: $50,000,000\n\nThe loans mature in 300 months, 240 months, 240 months, 300 months, and 120 months, respectively. What is the WAM, rounded to the ... | 58 | 30cd8ed3 | [
"To calculate the weighted average maturity (WAM), we need to determine the maturity of each loan by its size relative to the entire pool.\n\nSince loan 1 is 35% out of trust, we only consider 65% of the $300,000,000 loan amount.\n\nWAM = (195000000 / 670000000 * 300) + (250000000 / 670000000 * 240) + (100000000 / ... |
[
"What are the key differences between IFRS 15 and FRS 102?",
"On June 30 2022, Poly entered a contract to manufacture bespoke machinery for a local customer. The customer instructed Poly on the machinery specification, as Poly's standard machines were unsuitable. The customer paid an upfront deposit, which is ref... | 59 | ce6d2523 | [
"IFRS 15 and FRS 102 are both accounting standards that deal with revenue recognition, but they have key differences in complexity and approach:\n- FRS 102: Based on IAS 18 Revenue, it offers a principle-based approach, requiring judgment to identify when revenue can be recognized.\n- IFRS 15: Introduces a more com... |
[
"During the past two years 2022 and 2023, a semiconductor distributor made the following purchases and sales:\n\nIn 2022, it purchased an inventory of 121,500 wafers at a cost of $10.67 per wafer and sold 112,650 units at a price of $13.99 per wafer. In 2023, it bought 284,800 units at a cost of $8.23 per wafer and... | 60 | c64f05ac | [
"First, let's recap the data given in the question.\n\n| Year | Purchases | | Sales | |\n|-----------|---------------|-------------|------------|----------|\n| | Units | Cost | Units | Price |\n| 2022 | 121,500.00 | 10.67 | 121,500.00 | 13.99 |\n| 2023 | 284,800... |
[
"What is operating segment disclosure? When does IFRS 8 allow aggregating operating segments?",
"Techno sells computer games. Sales are made through the website as well as through brick and mortar stores. The products sold online and in stores are the same. Techno sells new releases for $40 in its stores, but $30... | 63 | ae5e6339 | [
"Operating segment disclosure: A company's disclosure of information about its business components that:\n- Earn revenues and incur expenses.\n- Have separate financial info.\n- Are regularly reviewed by management.\n\nIFRS 8 allows aggregating operating segments if they have similar economic characteristics, produ... |
[
"What is the difference between inherent goodwill and purchased goodwill?",
"If XYZ Inc is acquired for a purchase price of $500 million with a fair value of assets of $400 million and no liabilities, what is the purchased goodwill? How will this be recorded on the balance sheet of the company that acquired XYZ I... | 65 | eb7481d6 | [
"# Inherent Goodwill\nInherent Goodwill is the value of the business more than the fair value of its separable net assets and cannot be purchased directly. It increases with time due to certain factors such as good reputation of the business, customer loyalty, and brand recognition.\nInherent Goodwill cannot be cal... |
[
"How is deferred tax is calculated for long-term assets?",
"My company has purchased a manufacturing plant for $100,000. For the company's accounting purposes, the useful life of this asset is five years; however, the tax authority requires depreciation over four years. The current tax in our jurisdiction is 25%.... | 67 | e28d6adf | [
"Deferred tax is the income tax payable in future periods with respect to taxable temporary differences. To calculate the deferred tax for your plant, you need to determine the temporary difference between the depreciation expense for tax purposes and accounting purposes. Temporary differences are defined as differ... |
[
"I have purchased $200,000 worth of shares of Apple from a broker by posting only a 40% margin. The broker requires a maintenance margin of 30%. They have told me that I need to ensure my deposit remains above the margin requirement or else the broker will margin call for more deposit. What does this mean?",
"At ... | 68 | 3c770bd0 | [
"Maintenance margin, also known as minimum maintenance or variation margin, is the minimum amount of equity an investor must keep in a margin account to avoid a margin call.\n\nSince you have borrowed the funds from the broker to invest in the Apple stock, they have a risk of losing this money. The maintenance marg... |
[
"Jack, an investor, buys 1000 shares of Carhub Ltd. at a price of $20 per share in 2020. He plans to hold it for the long run. After a year, the price of one share of Carhub Ltd. increases to $30. After 2 years, the share price of Carhub Ltd. suddenly decreases to $15. Seeing no potential growth in Carhub Ltd. in l... | 69 | 32583a20 | [
"Cash Outflow = 1,000 * $20 = $20,000\n\nCash Inflow = 1,000 * $15 = $15,000\n\nNet Profit/(Loss) = $15,000 – $20,000 = ($5,000)\n\nThe amount of loss incurred by Jack is $5,000.",
"The loss incurred by Jack is realized. Realized Profit/Loss is the actual amount of profit or loss incurred on the sale of the under... |
[
"What is the difference between contingent liability and provision?",
"What are the reporting requirements for contingent liabilities?"
] | 70 | 2db42262 | [
"1. A provision is a present obligation of uncertain amount and timing, as well (e.g. provision for bad debts). Contingent Liability is a possible obligation that results from past events and whose existence will rely upon the happening or non-happening of the future event.\n2. Provision is a recognized liability w... |
[
"What is the beta of a stock? How should you interpret a beta value?",
"Blake is considering three companies to suggest his client, William who is trying to invest his money for retirement. Blake wants to select the stock which has the lowest volatility compared to the market.\n\nThe first company is Amazon which... | 71 | cd00dd04 | [
"# Formula\n\nBeta is the risk measure that measures the volatility of a stock compared to the market. Beta is measured as follows:\n\nBeta = Correlation(Ri, Rm) * σi / σm\n\nHere: \n\n- Correlation (Ri, Rm) is the correlation between the return of a stock and the market return.\n- σi is the standard deviation of ... |
[
"What are the formulas for discrete and continuous compounding?",
"I have three options to invest my $200,000 savings for the next 8 years. The first option is to invest them at 8% per annum to be compounded continuously. The second option is to deposit this money for a 6% compounded monthly return. The third opt... | 73 | 3a2ef022 | [
"# Formulas\n\nFuture value of an investment can be found using the following formulas depending on how the compounding takes place.\n\n## Discrete Compounding\n\nFor discrete compounding, the following formula is used:\n\nFV = PV (1+r/m)^nm\n\n- FV = future value\n- PV = present value (value today)\n- r = return\n... |
[
"I purchased a property that cost $900,000 using a 30-year mortgage for 70% of the total price while funding the remaining amount from a savings account. The mortgage rate is 5.5% annually. \n\nHow much of the first monthly payment will go towards principal? How much will go towards interest?",
"What's the total ... | 74 | 87b3d75d | [
"We can calculate the monthly payment using:\nPMT = P * (r * (1 + r)^n) / ((1 + r)^n - 1)\n\nWhere:\n\nPMT = Monthly payment\nP = Loan principal\nr = Monthly interest rate\nn = Number of payments\n\nThis gives us a monthly payment (P&I) of $3,577.07. The interest portion can be calculated as (r * P), which gives us... |
[
"Our company had 5000 laptops, each of them valued at $1000 inventory at the start of the year. During the year, we made purchases of 2000 units at $1200 in January, 1000 at $800 in July and 900 at $750 in September. We sold 3000 units in February, 3000 in August and 2000 in December. \n\nHow would these transactio... | 76 | 190c6263 | [
"# WAC\n\nThe weighted average method assigns the average cost of production to given product. \n\nCost of goods of 3000 in Feb = 3000 x $997 = $2.991M\n\nCost of goods of 3000 in Aug = 3000 x $997 = $2991K\n\nCost of goods of 2000 in Dec = 2000 x $997 = $1994K\n\n(Impact on Income Statement)\nTotal COGS = $7.976M ... |
[
"Walbury had a revenue before taxes of $900 million on which it had to pay a tax of 35%. During the year, it paid $16 million in dividends to the preferred shareholders. It had 220 million weighted average common shares outstanding and it also had 200,000 options outstanding which can be converted to ordinary share... | 77 | 1727c45d | [
"# Step 1\n\nNet income = income before taxes - Taxes\nNet income = $900,000,000 - ($900,000,000 * 35%)\nNet income = $900,000,000 - $315,000,000\nNet income = $585,000,000\n\n# Step 2\n\nBasic EPS = (Net income - preferred share dividends) / Weighted average shares during the year\n\nBasic EPS = ($585,000,000 - $1... |
[
"The Manufacturing equipment of a company was valued at $1,000,000 at the beginning of the year on January 1st 2023 when its accumulated depreciation was $450,000. During 2023, an additional depreciation of $50,000 was recorded. \n\nAccording to the cash flow projects, it is expected that the asset will generate ca... | 78 | ab09b5a5 | [
"The sum of the total undiscounted cash flows is $80,000.00 + $86,000.00 + $90,000.00 + $60,000.00 + $70,000.00 = $386,000.00. \n\nThe present value of these cash flows is computed in the following table.\n\n| Discounted Cash Flows | | | |\n|-------------------------... |
[
"Our software solutions company has a revenue of $28 million and all sales are made on 30 days credit. The average trade receivables balance is $5.37 million and usually, 2% of the credit sales are bad debts. \n\nWe have been trying to reduce the collection period of debts and have spent huge amounts of money but i... | 79 | 0ecf476a | [
"# Option 1\n\n## Benefits\nCurrent trade receivables = $5370000\n\nRevised trade receivables = $28000000 * 30/365 = $2301370 \n(With factoring, the average trade receivables balance will be reduced to $2,301,370. This is derived from the 30-day collection period, assuming the same annual sales)\n\nReduction in rec... |
[
"What is the difference and relationship between FRS 102 and IFRS 9?",
"Beto purchased equity shares in another company on May 1st 2022. At the date of acquisition, the investment cost was $11,000 and transaction costs were $2,000. At the reporting date, the shares had a fair value of $13,000.\n\nBeto's finance d... | 80 | 91fd499c | [
"FRS 102 provides a baseline for accounting for financial instruments in the UK, and companies can choose to adopt the more advanced IFRS 9 standard for recognition and measurement. As Per IFRS 9 Financial Instruments, investments in equity shares can be classified as fair value through profit or loss, which is the... |
[
"What is the relationship between a bonds YTM and its default risk?",
"You are given the following information about three bonds issued by different companies. Each bond has a 2-year maturity but differs in terms of face value, coupon rate, and purchase price. Assume the companies have similar credit ratings, are... | 82 | ff5529e0 | [
"While YTM is not a perfect measure of default probability, it is an important indicator of how investors view the risk of a bond. It is generally correlated with risk, meaning a higher YTM corresponds to a great perception of default probability.",
"To approximate the YTM, we can use the following formula: YTM=... |
[
"Bob is preparing to file his U.S. federal income taxes for the most recent tax year. He has done his research and is eager to maximize his refund. He plans to claim the standard deduction, as his itemized deductions would only total $3,000. He does not intend to claim any above-the-line deductions.\n\nBob's federa... | 83 | c67c5f87 | [
"Bob's calculation is incorrect. He appears to be assuming that the $8,500 electric vehicle tax credit is fully refundable. However, the question specifies it as an \"offset tax credit,\" meaning it is non-refundable. A non-refundable tax credit can reduce Bob's tax liability to zero but cannot result in a negative... |
[
"Sallie is completing her 2024 Form 1040 with a filing status of Single. Her taxable income for the year is $185,000. She paid $7,000 in mortgage interest, $1,800 in property taxes, $1,000 in sales taxes, and $5,300 in state income taxes. She has no other expenses eligible for itemized deductions. Considering the s... | 84 | 1bb784ce | [
"First, we must determine the maximum amount of itemized deductions available to Sallie:\n • Mortgage Interest: $7,000\n • Property Taxes: $1,800\n • Sales Tax: $1,000\n • State Income Tax: $5,300\nWhile these items total $15,100, Sallie is not permitted to de... |
[
"Suppose you're appraising a commercial property, and you've been informed that the appropriate cap rate falls somewhere between 6.5% and 7.25%. Which cap rate would result in a more conservative valuation, and why?",
"Assume you are analyzing a commercial property with a reported Net Cash Flow (NCF) of $573,250 ... | 85 | bfe2760c | [
"In commercial real estate, the cap rate (capitalization rate) is used to derive a property value based on the Net Cash Flow (NCF). The property value is calculated using the formula:\n\nProperty Value = NCF / Cap Rate\n\nA higher cap rate results in a lower property value. Therefore, the 7.25% cap rate would resul... |
[
"The Dow Divisor is roughly 0.15173. Today, the share price of AAPL (which is part of the Dow 30) has increased by 5.00 per share. Meanwhile, the Dow is up 0.2%, increasing from 41,800 to 41,883.6. What percentage of the Dow's daily increase can be attributed to AAPL?",
"What is the purpose of the Dow Divisor?"
] | 86 | 09c1bbb7 | [
"The Dow has increased by approximately 0.20%, which amounts to 83.60 (41,883.6 - 41,800). The stated divisor value of 0.15173 indicates that each $1.00 change in an underlying stock price corresponds to a 6.5906 change in the Dow (1.00 / 0.15173).\n\nThe 83.60 change in the Dow correlates to a cumulative change of... |
[
"L Brands is currently trading at $35.00 per share with 275 million shares outstanding. The company has announced a $1.5 billion share buyback. Assuming stable market conditions, how would investors likely interpret these buybacks?",
"Assuming L Brands' quarterly net income and stock price remain constant at $35.... | 87 | 89f6681d | [
"The buyback will likely be viewed positively by investors, signaling that management believes its stock is undervalued and a good investment. By reducing the number of shares outstanding, the buyback will increase EPS and make shares more scarce. All else equal, these factors should push the stock price higher in ... |
[
"My company's debt cost of capital of 5% and an equity cost of capital of 8%. Let's say our debt-to-equity ratio is 0.7. What is our pre tax WACC?",
"Now let's say the corporate tax rate is 40%. What is the impact of the interest rate tax shield on our WACC?"
] | 88 | cda17a49 | [
"The WACC, or weight average cost of capital,\n\nWACC = (E / (E + D)) * r_e + (D / (E + D)) * r_d\n\nWhere:\nE = equity\nD = debt\nr_e = cost of equity\nr_d = cost of debt\n\nSInce the debt to equity ratio is 0.7, we know that:\nD / E = 0.7\nD = 0,7 E\nE = 1.428 D\n\nWhich means that:\n\nE / (E + D) = E / (E + 0.7 ... |
[
"What is the main difference between WACC-based valuation and APV valuation?",
"My company is considering an acquisition of another company for $100 million. Our current best estimate is that this new company will generate cash flows of $1 million dollars per year, and this will grow indefinitely at a rate of 4% ... | 89 | fe364936 | [
"The main difference lies in how they try to account for the interest rate tax shield. The WACC method tries to roll this into its estimate for the required rate of return. APV instead tries to first compute the unlevered value and then directly incorporate the value of the interest rate tax shield.",
"First, we ... |
[
"ABC llc made $1,604,299 in profits in the year 2023; $224,000 in Australia, $248,389 in Canada, $128,763 in the United Kingdom, $524,682 in the United States and $478,465 in India.\nIt paid corporate tax of $22,400 in Australia, $62,097.25 in Canada, $51,505.20 in the United Kingdom, $178,391.88 in the United Stat... | 5 | bd245234 | [
"To compute the effective tax rate, we can use the following formulas:\n\nTax Rate = Taxes Paid / Net Profits\nProfits Percentage = Net Profit / Total Profit\nProfit weighed share of the profits = Profits Percentage * Tax Rate\nEffective tax rate = Sum of the Profit weighed share of the profits in the individual c... |
[
"Kyle is a fund manager who manages wealth for high-worth investors in Iowa. One of his private equity funds which he manages as a general partner has $500 million of committed capital. The limited partners included a hurdle rate of 10% in the initial contract along with a full catchup clause. Moreover, there is no... | 4 | e3af7c3d | [
"# Investment 1:\nInvestment: $100 million\nSold for: $120 million\nGain: $20 million\nGeometric Mean: ($120m - $100m) / $100m * 100 = 20%\n\nThe return is above the hurdle rate so the profit will be shared according to 80/20.\n\nShare of Limited Partners = 80% of $20 m = $16m\nShare of General partner (Kyle) = $20... |
[
"Our company has leased a supercomputer for the next five years.\n\nWhat will be the two ways in which this transaction will show up on our income statement in the following years?",
"The supercomputer has a fair value of $12,000,000. The lease payment is $2,400,000 per year (with the first payment due at the sta... | 75 | 143600cf | [
"The impact on the income statement will come in two forms: \n1. The interest expense associated with the lease.\n2. The amortization of the lease asset itself.",
"We can start by looking at the present value of the lease, starting right before the first payment in 2024.\n\nPV = 2,400,000 / (1 + 0.0479)^0 + 2,400... |
[
"| Asset Description | A Corp ($) | B Corp ($) |\n|------------------------------|--------------|--------------|\n| Servers and Data Centres | 48,050 | 64,867.5 |\n| Office Buildings | 48,704 | 65,750.4 |\n| Receivables | 18,368 | 24,796.8 ... | 90 | b525b226 | [
"Let's divide these assets into current and noncurrent assets. \n\nCurrent: \nReceivables\nMarketable Securities\nInventory\nCash\nPrepaid Expenses\n\nNon-Current:\nServers and Data Centres\nOffice Buildings\nFurniture and Fixtures\nVehicles\nLand\nComputer Hardware\nNetworking Equipment",
"To compute the fixed a... |
[
"Shortly after the reporting date, a major credit customer of Cheetah Inc. went into liquidation due to heavy trading losses. It is expected that little or none of the customer's $22,500 debt will be recoverable. $20,000 of the debt relates to sales made prior to the 2021 year-end, and $2,500 relates to sales made ... | 91 | 82ed6392 | [
"The relevant standard is IAS 10, which covers everts that occur between the financial period end and the date on which the financial statements are approved by the board of directors.",
"In this case, $20,000 of the receivable existed at the reporting date and the liquidation of the major customer provides more ... |
[
"Mark & Co., a software company, enters into a contract with Chris Builders, a manufacturing company, to make a software that suits the daily operations and business needs of Chris Builders. The software project’s development cost is estimated to cost $5 million. The software is expected to generate cash flows in t... | 92 | bf0573ca | [
"The cost of $5 million would be recorded as an expense in the company’s accounts. \n\nAs per IAS 38 Intangible Assets, the development cost can be capitalized only if the following six criteria points are met: \n• Probable economic benefits\n• Intention to complete the project\n• Resources available to complete th... |
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