Week 5: Accounting Analysis 1
Tutorial Discuss Questions
Discussion Question 1
Consider the following scenarios for the year ended 31 December 2022. Fill in the missing blanks. Assume that the credit period allowed to customers is 60 days. Explain whether the how the following events affect the income, cash flow and accruals in 2022, and explain to which period the income, accruals and cash flow relate to.
Extracting data from DatAnalysis Premium database
• Go to library website: www.lib.monash.edu
• Click “Students”
• Click “Databases”
• Click “Business and Economics”
• Click “DatAnalysis premium”
• Log into the database using your login details
• Click on “Search Tool” and select “Time Series Financial Search”
• In Section A enter the ASX code of the companies or select GICS sector, industry group and industry
• In Section B select the category of ratios in section, sub-section and option is “display only”
• Select “Add Query”
• Enter “Search”
• Download the data on a spreadsheet
• Format the excel spreadsheet to enable data selection for creating line charts
Other data sources:
• Orbis
• Osiris
• Yahoo! Finance
Question 2: Estimating Earnings Persistence and Predictability
• Open the Excel spreadsheet titled “Earnings Quality Data.xlsx”
– It provides selected financial statement data of 4 US retail companies – Walmart, Kroger, Costco and Amazon.com
• For your assigned company, estimate:
– Earnings persistence
– Earnings predictability
• Compare the earnings persistence and predictability of your company with those of the industry
Discussion Question 2: Estimating Earnings Persistence
Some estimation issues:
– Try to use at least 5 years’ data (use longer time series if you can)
– What to do if your company is recently listed (i.e. does not have a long time series of data)?
– Should you scale earnings?
Discussion Question 3
How can one infer earnings quality by comparing earnings and cash flow from operations over time?