ACCOUNTING VS.

FINANCE CHEAT SHEET

by
Oana
Labes

Accounting KPIs Accounting vs. Finance Finance KPIs

CASH CONVERSION CYCLE ECONOMIC VALUE ADDED (EVA)
= DSO + DIO - DPO SCOPE = EBIT (1-tax) - ((Long Term Debt + Equity) x WACC)

Accounting involves recording, analyzing, Finance involves managing and allocating

DAYS SALES OUTSTANDING (DSO) financial resources for businesses EARNINGS PER SHARE (EPS)
and reporting financial transactions
= Average Accounts Receivable / = (Net Income - Pref. Dividends) /
Net Credit Sales x 365 FOCUS Weighted Average Shares Outstanding

Accounting is drive to ensure the accuracy Finance is driven to create value through
DAYS PAYABLE OUTSTANDING (DPO) PRICE TO EARNINGS RATIO (P/E RATIO)
and compliance of financial data strategic capital allocation
= Average Accounts Payable / Purchases x 365 = Market Price per Share / Earnings per Share
TIMEFRAME (EPS)
DAYS INVENTORY OUTSTANDING (DIO)
= Average Inventory / COGS x 365 Accounting deals with the day-to-day Finance focuses on the long-term financial FREE CASH FLOW (FCF)
recording and reporting of financial health and growth of a business = Operating Cash Flow - Capital Expenditures
TOTAL ASSET TURNOVER transactions
= Net Sales / Average Total Assets
REGULATIONS WGT. AVG. COST OF CAPITAL (WACC)
Accounting adheres to regulatory Finance deals with capital structure, = (E/V x Re) + ((D/V x Rd) x (1 - Tax Rate))
RETURN ON ASSETS frameworks such as GAAP, IFRS, and tax investments, and risk management
= Net Income/ Average Total Assets regulations RETURN ON INVESTED CAPITAL (ROIC)
TOOLS OF THE TRADE = EBIT (1-tax) / (Long Term Debt + Equity - Cash)
GROSS PROFIT MARGIN
= (Net Sales - Cost of Goods Sold) / Net Sales Accounting involves recording, analyzing, Finance works with financial modeling,
DIVIDEND PAYOUT RATIO
and reporting financial transactions forecasting, and investment appraisal
= Dividends / Net Income
NET PROFIT MARGIN techniques
= Net Income / Net Sales
RETURN ON EQUITY (ROE)
DEBT TO EQUITY RATIO
= Total Debt / Total Equity
Accounting vs. Finance Designations = Net Income / Average Shareholder's Equity

RETURN ON ASSETS (ROA)

CURRENT RATIO = Net Income / Average Total Assets
=Current Assets/ Current Liabilities ACCOUNTING FINANCE OPERATING CASH FLOW RATIO
NET WORKING CAPITAL = Operating Cash Flow / Current Liabilities
= Current Assets - Current Liabilities
CPA US (Certified Public CFA (Chartered Financial Analyst)
Accountant) FRM (Financial Risk Manager) 10 Finance Skills
CPA Canada (Chartered CAIA (Chartered Alternative Inv.
The Master Budget Professional Accountant Analyst) For Managers
CMA (Certified Management CFP (Certified Financial Planner)
FINANCIAL FINANCIAL RATIO
Accountant) CTP (Certified Treasury
ANALYSIS ANALYSIS
OPERATING BUDGET CIA (Certified Internal Auditor) Professional)
ACCA (Association of Chartered CBV (Chartered Business Valuator) BUDGETING AND PERFORMANCE
Sales Forecast MANAGEMENT
Certified Accountants) CRM (Certified Risk Manager) FORECASTING
Revenue Budget FP&A (Certified Corporate
CGMA (Chartered Global BREAK-EVEN RISK
Financial Planning & Analysis MANAGEMENT
Management Accountant) ANALYSIS
Professional)
Cost of Sales (COS)

Production Budget
Selling and COST-VOLUME- CASH FLOW
Direct PROFIT ANALYSIS ANALYSIS
Materials
Direct
Labour
Manufacturing
Overhead Administration
Budget Budget Budget
(SG&A) PERFORMANCE
CAPITAL
Cost of Goods Manufactured
(COGM) and Cost of Goods Sold
(COGS) Budgets
Budget
Accounting vs. Finance Careers BUDGETING METRICS

WORKING CAPITAL BUSINESS/

Operating Cash Budget ASSET VALUATION
CAREER PROGRESSION MANAGEMENT

FINANCIAL BUDGETS
Staff Accountant → Senior Accountant →
Accounting Manager → Controller →
Financial Analyst → Senior Financial
Analyst → Financial Manager → CFO or Financial Analysis
Scorecard
Transition to Investment Banking,
CAPEX Cash Financing CFO
Private Equity, or Venture Capital Horizontal Analysis (Trend Analysis)
Budget Budget Budget
WORK TYPE Horizontal Analysis
(Trend Analysis)
Budgeted Financial Statements
Detail-oriented, technical, compliance- Strategic, forward-looking, analytical,
Adapted from CPA Ontario

focused, process-driven decision-making-focused

(Common Size Analysis)

Investment Banking, Private Equity, Profitability

20 Confusing
Efficiency
Vertical Analysis

Audit, Tax, Consulting, Risk Ratios

Venture Capital, Corporate Strategy, Ratios
Management, Forensic Accounting
Treasury, Risk Management
Accounting Topics
ACCRUAL VS. CASH FIXED ASSETS VS
Liquidity Solvency
ACCOUNTING CURRENT ASSETS
Ratios Ratios
DEPRECIATION VS. ACCUMULATED
AMORTIZATION DEPRECIATION VS
DEPRECIATION EXPENSE Ratio, Sensitivity & Scenario Analysis
GROSS PROFIT VS.
CONTINGENT Cash Flow Analysis
NET PROFIT
LIABILITIES VS
GROSS PROFIT VS. CONTINGENT ASSETS
GROSS PROFIT
MARGIN
DEFERRED REVENUE VS.
UNBILLED (ACCRUED)
EBITDA RATIOS
GAAP VS REVENUE EBITDA MARGIN
IFRS
DEFERRED TAXES VS
CURRENT TAXES EBITDA / Revenue x 100
FAIR VALUE VS.
Cash Flow Analysis
HISTORICAL COST PROVISION VS INterest COverage
RESERVE
ALLOWANCE FOR
EBITDA / Interest Expene
DOUBTFUL ACCOUNTS VS CAPITAL STOCK VS
BAD DEBT EXPENSE RETAINED EARNINGS DEBT SERVICE COVERAGE
GOODWILL VS LEASE VS
EBITDA / (principal + interest)
INTANGIBLE ASSETS LOAN
FIXED CHARGE COVERAGE
CAPITAL EXPENDITURES VS USEFUL LIFE VS.
REVENUE EXPENDITURES ECONOMIC LIFE EBITDA + Fixed Charges - Cash Taxes -
Unfunded CAPEX - Shareholder Distributions) /
ACCOUNTING POLICY
FAIR VALUE VS. (P+I+Fixed Charges
VS. ACCOUNTING
CARRYING VALUE ESTIMATE
FUNDED DEBT TO EBITDA

Total Financed Debt / EBITDA

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