Using Federal Tax Returns for Ratio and Cash Flow Analysis

...credit analysis for good and bad times

Using Federal Tax Returns for Ratio and Cash Flow Analysis explores in detail the form and content of business and personal income tax returns, the role of the Section 179 Deduction, the information content of Schedule K-1, the construction of personal cash flow statements, the information content of Schedule M-1, the construction of key performance ratios, and the construction of cash flow proxies and the Uniform Credit Analysis (UCA) cash flow statement. At the end of the eight online sessions, participants will know how to properly compute key performance ratios, cash flow proxies such as traditional cash flow and EBITDA, and the Uniform Credit Analysis (UCA) cash flow statement from information in federal income tax returns.

Target Audience

Analysts and lenders interested in exploring and mastering the proper computation of ratios and cash flow statements from information in federal income tax returns.

View Details

Select the Show Details to view the product in more detail.

To view another College Series, click the Series name in the left panel

Description
1. Business Income Tax Returns
Purchase
Options
Tue. 10/18Recording
... ... where's the beef
In the first webinar session, participants examine the major differences between Subchapter C corporations, Subchapter S corporations, partnerships and limited liability companies, and sole proprietorships and how those differences flow through to the associated business income tax returns. They review the purpose of business income tax returns by type of business organization and explore the role of Schedule K, Schedule K-1, Schedule L, and Schedule M-1. In addition, participants identify the schedule and line number that capture net taxable income on each set of business income tax returns, as well as identify, if available, the amount of federal income tax due and payable on taxable business income. They explore the manner in which income tax regulations determine the channels and mechanisms for providing compensation to business owners, and they identify the role of dividends, distributions, and withdrawals in assessing borrower risk.
2. The Section 179 Deduction
Purchase
Options
Tue. 10/25Recording
... credit analysis in good times and bad
In the second webinar session, participants examine the purpose of the Section 179 deduction. They examine its conditions and limitations for use and its role in establishing taxable business income for each of the standard business organizations. They identify the impact, if any, of the Section 179 deduction on a borrower's accrual financial statements. They trace the impact of the Section 179 deduction on the personal income tax obligations of partners and owners of partnerships, limited liability companies, Subchapter S corporations, and sole proprietorships. In addition, participants examine the impact of the Section 179 deduction on borrower performance ratios and cash flow statements - including the Uniform Credit Analysis (UCA) cash flow statement - computed from information in the business income tax returns as well as from information in the accrual financial statements.
3. Understanding Schedules K-1
Purchase
Options
Tue. 11/1Recording
... ... follow the money
In the third webinar session, participants review the information content captured in Part I on Schedule K-1 (Form 1065) and in Part I on Schedule K-1 (Form 1120S). They examine the information provided in Part II on Schedule K-1 (Form 1065) with specific attention to amounts recorded for a) non-recourse financing liabilities, b) qualified non-recourse financing, and c) recourse financing for a partnership or limited liability company. They explore the similarities and differences between Schedule K-1 (Form 1065) and Schedule K-1 (Form 1120S) with respect to information requirements and their relevance to analysis. In addition, participants track the migration for data entered in Part III of both schedules to specific locations on the personal income tax returns. Further, they identify cash and non-cash amounts recorded in Part III on both Schedules K-1 and again on the designated schedules in the personal income tax returns.
4. Personal Income Tax Returns and Cash Flow
Purchase
Options
Tue. 11/8Recording
... ... what is cash and what is not?
In the fourth webinar session, participants review the fundamental purpose of personal income tax returns. They examine the information content and cash or non cash amounts reported on Schedules A, B, C, D, E and appropriate Schedules K-1. They identify the relationship between business income tax returns and personal income tax revenue and expenses for owners and partners of pass-through entities. Further, participants conduct a step-by-step manual construction of a personal cash flow statement using information from the personal financial statement, the personal income tax returns, and accrual financial statements for the borrower. As the final step in the webinar, they assess whether a personal cash flow surplus or a guarantor's liquid personal assets is the best estimate of guarantor cash support in a business crisis.
5. Schedule M-1 and the Accrual Income Statement
... credit analysis in good times and bad
In the fifth webinar session, participants explore in detail the information captured in Schedule M-1 and the use of that information in explaining reasons for differences between accrual net income on a company's accrual financial statements and the taxable income its partners and owners must report on their personal income tax returns. In the process of examining the information content in Schedule M-1, they address the roles of guaranteed payments to partners and the Section 179 deductions in establishing net taxable income for partners and owners of partnerships and Subchapter S corporations. In addition, participants examine the process for transforming information in the business income tax returns for a partnership or Subchapter S corporation into an accrual income statement, which then allows proper computation of performance ratios, cash flow proxies, and the Uniform Credit Analysis (UCA) cash flow statement.
6. Business Income Tax Returns and Ratio Analysis
... credit analysis in good times and bad
In the sixth webinar session, participants examine the differences in key financial performance ratios computed from business income tax returns and accrual financial statements. Building on the issues explored in the prior webinar session on the use of information in Schedule K and Schedule M-1 in constructing an accrual income statement, they revisit and extend the process of transforming the quasi-income statement on the first page of business income tax returns for partnerships, limited liability corporations, and Subchapter S corporations - Schedule 1065 and Schedule 1120S - into an accrual income statement. Further, participants assess the value of discarding business income tax returns as the basis for borrower analysis in favor of transforming Schedule 1065 or Schedule 1120S into an accrual income statement for use in proper ratio construction and borrower assessment.
7. Business Income Tax Returns and Cash Flow Analysis
... credit analysis in good times and bad
In the seventh webinar session, participants briefly review the process of transforming the quasi-income statement on the first page of business income tax returns for partnerships, limited liability companies and Subchapter S corporations - Schedule 1065 and Schedule 1120S - into an accrual income statement. They use the converted accrual income statement to compute cash flow proxies and contrast the results with cash flow proxies computed from unadjusted business income tax return information. Further, participants explore whether the Uniform Credit Analysis (UCA) cash flow statement can be constructed from unadjusted business income tax returns. They identify the reasons why unadjusted business income tax return information is insufficient to do so and use the converted accrual income statement, along with information in Schedule L, to properly compute the UCA cash flow statement.
8. Cash Based Income Tax Returns
... ... is cash enough?
In the eighth and final webinar session, participants review the methodology for transforming the quasi-income statement - reported on a cash rather than accrual basis - for a partnership, limited liability company or Subchapter S corporation - Schedule 1065 and Schedule 1120S - into an accrual income statement, using information in Schedule K, Schedule M-1, and associated statements. They explore the differences in key performance ratios computed from cash-based business income tax returns and accrual financial statements. In addition, participants examine the differences between ordinary business income reported on a cash basis on Schedule 1065 or Schedule 1120S and actual Business Cash Income reported on the Uniform Credit Analysis (UCA) cash flow statement. Further, they assess the importance of identifying the source of cash to service interest-bearing debt, as well as the necessity of using accrual financial statements for ratio and cash flow analysis.