Page 46 - FINAL CFA I SLIDES JUNE 2019 DAY 9

Session Unit 9:
33. Financial Statement Analysis: Applications

Alternative assumptions: all paid at the end of Year 6, spread evenly over some specific no. of years, or payments
at the average of the prior five years until the obligation for future payments beyond 20X6 is met:

tanties

Assuming that capital lease payments beyond 20X6 are spread evenly over 5 years ($1.4 million

p/a), we will use r = 13%; same assumption beyond 20X6 for the operating leases ($600,000 p/a
for five years), we can calculate the PV of these payments, and, thus, the operating lease liability:

$2.904 million should be added to the firm’s liabilities and assets to better reflect the use of
off-balance-sheet financing and to calculate solvency ratios such as D/E and D/A.

Goodwill, p.330 –to compare, subtract goodwill from total assets, reverse impairment to net
income; also do price to tangible book value NOT price to book values when needed!