Financial Statement analysis
A snapshot of the firm's assets
Financing of the assets at a given point in time
Lists assets, liabilities and equities
Assets on left, Liabilities and OE on right side
ASSETS = LIABILITIES + EQUITY
n 1i1 cfw_100.0%
Answer: Cash ows non: liquidating activities
Which one of the following is NOT a part of the statement of cash flows?
Solution: Cash flows from liquidating activities is not part of the cash
flow statement (note: liquidation of assets he
' Which one ofthe following is NOT an example of meaningful ratio analysis? I
C] Using ratios to compare a rm with high performing competitors.
C] Analyzing the trend in ratios overtime for a single rm.
C] Using GAAP rules to calculate standard ratios.
n Accounts payable represents money a firm owes to: 1 1 (100.0%) ,
Answer: Suppliers due to purchases made on credit
 Suppliers due topurchases made on credit Found In the following sectionls) ofthe text:
I tenders undershortterrns borrowing agreements
m Maeroseft Maerosoft I
Balance Sheet (in 000) Ineune Statement (in 30)
December 31.2016 Its ofDecember 31,2016
erent Assets Cment Liabilities Revenue 15 900
Cash 2 .500 Accounts Payae 1,960 Cost of Goods Sold m
Aee onnts Reeeiv able 3:100 Notes Payable 8
A firm has sales of $101 million. variable costs of $74 million. fixed costs of $9 million. depreciation of$6 million, interest expense $3 million and taxes I
of $5 million. What is the degree of combined leverage? cfw_Round to the nearest hundredth: .00]
1 A company has 100,000 $1,000 face value bonds outstanding that are currently priced at $925 each. These bonds have 25 years until maturity and l
a 6% annual coupon rate (coupons are paid semiannually]. lfthe company has a marginal tax rate that is 34%,w
The total cost of a new machine. including the shipping and installation, is $250,000. Using the 3-year MACRS schedule, determine the depreciation
expense in year 3.
Year 3YR MACRS 1%]
n Which of the following is NOT one of the ways to value a firm that was covered in this topic? I
[:1 Replacement cost
[:1 Comparable multiples
[:1 Discounted cash ows (DEF)
C] All of these are methods
C] None of these are methods
a You have worked hard f
A rm purchased raw materials onjunel5t on credit. paid for the materials on June 10, finished producing and sold the finished product onJune I
20, and received payment on June 27m. How many days was the operating cycle?
Aworking capital increase caused
I Which one ofthe following is NOT a characteristic of ordinary annuities?
[:1 Payments are equally spaced.
C] Payments are made at the beginning of each period.
[:1 Payments are of equal amounts.
C] All are characteristics of ordinary annuities.
n A bond is similar to a loan. 11 cfw_100.0% ,
. Answer: "HE
Faise Found in the following sectionis) of the text:
1.1 What Is Finance?
a A bond is a debt instrument issued by corporations or governments. 1f1 (100.0%)
Faise Found in the followin
1. What type of bond is tax exempt?
9. Your credit union is advertising a 10 year CD at a rate of 3% EAR. These CD's compound
quarterly. What is the APR?
14. Which is the largest source of capital for firms?
Which of the following is not one of the ways the Dodd FrankAct monitors capital markets? I
C] Regulate types of assets banks can hold
C] Monitor hedge fund industry
C] Systematic risk analysis
C] Assign a CAMELS score to bank
C] Monitor insurance industr
I Given the information below, what is the expected return for Stock A?
Economic State Probability: iT Returns for Stock A
Recessionaryr .40 10%
Expansionar.r .60 23%
I In a CAPM framework, why.r do investors hold the market portfolio
C] The market has a
. Accounts that vary directlyr with sales are called:
a What is typically covered by discretionary accounts?
C] Elastic accounts D
C] Salesbased accounts _ FCF
C] Spontaneous accounts U 6160
C] Fluid accounts 0 DEN
C] Discretionary accounts C] EV
I What is the value ofa preferred stock where the dividend rate is 15 percent on a $100 par value? The appropriate discount rate is IZ percent.
r'ou are looking to purchase Urdway common stock at $
Formula not given on exam.
Gordon Growth Model with 0% growth rate.
Formula NOT given on Test
Formula NOT given on exam
1st use Formula for CF Operating Activity (slide 6) then FCF
Degree of Operating Leverage
Higher reliance on fixed assets leads to lower risk
and more stability of return. i.e. power utilities
Degree of Operating Leverage measures the risk.
Sales Variable Cost
- = DOL
Firm A has Sales of 10m & Va
Investors deemed by the SEC to be sophisticated enough to purchase
A bond covenant that requires the firm to do something.
Costs that are incurred when management does not act in the
(4.4%) StudyGuide 5 TimeValueofMoney
(5.8%) StudyGuide 7 EquitySecurities