Business Income Tax Returns and Cash Flow Analysis
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In this 7th course of the Federal Tax Return Analysis Skill Series, participants will convert tax returns into accrual income statements, compute and compare cash flow proxies, and explore constructing UCA cash flow statements, highlighting the insufficiency of unadjusted tax return information and using Schedule L for accurate computations.
Certificate
1 credit or $295
Cost
1.5 - 2 Hrs.
Duration
1 hr.
Prep Time
1
Quiz
Overview
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.
Who Should Attend
This Course is ideal for participants currently in or aspiring to enter the following job functions:
- Credit Management
- Commercial Credit Administration
- Commercial Loan Administration
- Commercial Loan Portfolio Management
- C & I Lending
- Corporate Lending
- Loan Review
- Special Assets
- Internal Audit
- Non-Profit and Municipality Lending
- Health Care Provider Lending
- Specialized Lending
- Credit Analysis
Prerequisites
Familiarity with accrual financial statements and the use of ratios and cash flow statements in assessing borrower risk.
Objectives
By the end of the webinar session, participants will be able to:
- Compute two proxies for business cash flow - net income + non-cash charges and EBITDA - and compare the results and messages about borrowing causes, sources of cash to service interest-bearing debt, and the borrower's financing requirement for the year using unadjusted business income tax information only.
- Convert Schedule 1120S or Schedule 1065 to an accrual income statement using information from Schedule K and Schedule M-1 and compare the results to the actual accrual income statement for the borrower.
- Assess the different messages about borrower cash flow provided by cash flow proxies based on unadjusted business income tax information and those computed from the converted accrual income statement.
- Construct a UCA cash flow statement using the converted accrual income statement and information from Schedule L and associated statements.
- Identify the differences in messages about borrowing causes, sources of cash to service interest-bearing debt, and the borrower's financing requirement for the year provided by the two cash flow proxies and the UCA cash flow statement.
- Identify differences in the income statement conversion process and subsequent UCA cash flow construction for a partnership or limited liability company that reports its information-only results on Form 1065.
Materials(access provided with registration)
- Credit Refresher on The ABCs of Cash Flow
- Credit Refresher on Business Income Tax Returns and Ratio Analysis
- Credit Refresher on Business Income Tax Returns and Cash Flow Analysis
- Form 1120S for Benson Manufacturing, Inc.
- Accrual Financial Statements for Benson Manufacturing, Inc.
- Exercise for the Session 7 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
- Webinar Poll Solutions
- Exercise Solutions
This is Course 7 of 8 in the Federal Tax Return Analysis Skill Series
Business Income Tax Returns
The Section 179 Deduction
Understanding Schedules K-1
Personal Income Tax Returns and Cash Flow
Schedule M-1 and the Accrual Income Statement
Business Income Tax Returns and Ratio Analysis
Business Income Tax Returns and Cash Flow Analysis
Cash Based Income Tax Returns
