1. Do you know what is a deferred tax asset and why might one be created?
Deferred tax asset arises when a company actually pays more in taxes to the IRS than they show as an expense on their income statement in a reporting period.
Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.
2. Will you be out to take my job as Associate Finance Executive?
Maybe in about twenty years, but by then, I suspect you'll be running the entire company and will need a good, loyal lieutenant to help you manage this department!
3. Tell me what is a deferred tax liability and why might one be created?
Deferred tax liability is a tax expense amount reported on a company's income statement that is not actually paid to the IRS in that time period, but is expected to be paid in the future. It arises because when a company actually pays less in taxes to the IRS than they show as an expense on their income statement in a reporting period.
Differences in depreciation expense between book reporting (GAAP) and IRS reporting can lead to differences in income between the two, which ultimately leads to differences in tax expense reported in the financial statements and taxes payable to the IRS.
4. Is it possible for a company to show positive net income but go bankrupt?
Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.
5. Tell us Is it possible for a company to show positive cash flows but be in grave trouble?
Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves lack of revenues going forward.in the pipeline
6. Tell me why are increases in accounts receivable a cash reduction on the cash flow statement?
Since our cash flow statement starts with net income, an increase in accounts receivable is an adjustment to net income to reflect the fact that the company never actually received those funds.
7. Tell me from your resume, it looks like you were fired twice. How did that make you feel?
After I recuperated from the shock both times, it made me feel stronger. It's true that I was fired twice, but I managed to bounce back both times and land jobs that gave me more responsibility, paid me more money, and were at better firms.
The morale here is very high. I've been exposed to the "seamy underbelly" of this business, but I'm still passionate about working in it.
8. Tell us what is your biggest weakness that's really a weakness, and not a secret strength?
I am extremely impatient. I expect my employees to prove themselves on the very first assignment. If they fail, my tendency is to stop delegating to them and start doing everything myself.
To compensate for my own weakness, however, I have started to really prep my people on exactly what will be expected of them.
9. Suppose I buy a piece of equipment, walk me through the impact on the 3 financial statements?
Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement)
Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while retained earnings go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).
I consider myself ambitious, but I'm also practical. As long as I am continuing to learn and grow within my position, I'll be a happy camper. Different companies promote people at different rates, and I'm pretty confident that working for you will keep me motivated and mentally stimulated for several years to come.