MGT 6201 ACTUAL TEST ANSWERS AND QUESTIONS
SET A+
✔✔Revenues - ✔✔Inflows from primary business activities (selling goods/services)
✔✔Expenses - ✔✔Costs incurred to generate revenues (COGS, Rent, Wages)
✔✔Gains/Losses - ✔✔From peripheral activities (i.e. selling a delivery truck)
✔✔Statement of Stockholders' Equity (definition) - ✔✔Shows changes in equity
accounts over a period
✔✔Contributed Capital - ✔✔Money Invested by owners (stock issuances)
✔✔Retained Earnings - ✔✔Cumulative Earnings kept in the business
✔✔Statement of Cash Flows (definition) - ✔✔Shows changes in cash over a period,
categorized by activity type
✔✔Operating Cash Flows - ✔✔Cash from day-to-day business (customers/suppliers)
✔✔Investing Cash Flows - ✔✔Cash from buying/selling long-term assets
(buildings/equipment)
✔✔Financing Cash Flows - ✔✔Cash from investors and banks (issuing stock, borrowing
debt, paying dividends)
✔✔Accrual Accounting - ✔✔The idea that we do not just track cash inflows/outflows, but
also goods/services delivery (Standard for GAAP)
✔✔Revenue Recognition Principle - ✔✔Record Revenue when it is earned
(good/service delivered), regardless when cash is received
, ✔✔Matching Principle - ✔✔(Expense Recognition) Record expenses in the same period
as the revenue they helped generate
✔✔Walmart's Balance Sheet Strategy - ✔✔1. Asset Heavy: Walmart has massive
amounts of inventory and PPE
2. A/R is low: Walmart sells to consumers who pay immediately (cash/card). They don't
have to wait to get paid
3. Liabilities ("The Float"): Walmart has massive Accounts Payable - Walmart sells
inventory before they pay the supplier for it. This allows suppliers to effectively fund
Walmart's operations
✔✔Walmart's Income Statement Analysis - ✔✔1. High revenue, low margin: Walmart
generates huge sales ($600B+) but keeps a very small slice as profit (Net Income small
compared to sales)
2. SG&A (Selling, General, Administrative): This includes all store costs (wages for
greeters, electricity, advertising). Huge number for retail
✔✔Walmart vs Startups (Cash Flow) - ✔✔1. Operating Cash flow: Walmart Generates
massive positive cash from operations ($36B) because they are a mature "cash cow"
2. Investing Cash flow: The spend heavily on buying new assets (CAPEX), so this is
negative
3. Financing Cash Flow: They use their excess cash to pay down debt, buy back stock,
and pay dividends (Negative financing flow)
✔✔Revenue Recognition/When is it satisfied - ✔✔The top line of the income statement.
Revenue recognized when the performance obligation is satisfied
✔✔5 step model (Revenue Recognition) - ✔✔1. Identify contract
2. Identify performance obligations
3. Determine transaction price
4. Allocate Price among obligations
5. Recognize Revenue
✔✔Cash (classification & what is it) - ✔✔Current Asset, currency/checking accounts
✔✔Cash Equivalents (classification & what is it) - ✔✔Current Asset, Short-term
investments with maturity < 3 months
✔✔Restricted Cash (classification & what is it) - ✔✔Current Asset, Cash set aside for
specific purposes
✔✔Accounts Receivable (classification & what is it) - ✔✔Current Asset, funds owed by
customers from credit sales reported at Net Realizable Value (NRV)
SET A+
✔✔Revenues - ✔✔Inflows from primary business activities (selling goods/services)
✔✔Expenses - ✔✔Costs incurred to generate revenues (COGS, Rent, Wages)
✔✔Gains/Losses - ✔✔From peripheral activities (i.e. selling a delivery truck)
✔✔Statement of Stockholders' Equity (definition) - ✔✔Shows changes in equity
accounts over a period
✔✔Contributed Capital - ✔✔Money Invested by owners (stock issuances)
✔✔Retained Earnings - ✔✔Cumulative Earnings kept in the business
✔✔Statement of Cash Flows (definition) - ✔✔Shows changes in cash over a period,
categorized by activity type
✔✔Operating Cash Flows - ✔✔Cash from day-to-day business (customers/suppliers)
✔✔Investing Cash Flows - ✔✔Cash from buying/selling long-term assets
(buildings/equipment)
✔✔Financing Cash Flows - ✔✔Cash from investors and banks (issuing stock, borrowing
debt, paying dividends)
✔✔Accrual Accounting - ✔✔The idea that we do not just track cash inflows/outflows, but
also goods/services delivery (Standard for GAAP)
✔✔Revenue Recognition Principle - ✔✔Record Revenue when it is earned
(good/service delivered), regardless when cash is received
, ✔✔Matching Principle - ✔✔(Expense Recognition) Record expenses in the same period
as the revenue they helped generate
✔✔Walmart's Balance Sheet Strategy - ✔✔1. Asset Heavy: Walmart has massive
amounts of inventory and PPE
2. A/R is low: Walmart sells to consumers who pay immediately (cash/card). They don't
have to wait to get paid
3. Liabilities ("The Float"): Walmart has massive Accounts Payable - Walmart sells
inventory before they pay the supplier for it. This allows suppliers to effectively fund
Walmart's operations
✔✔Walmart's Income Statement Analysis - ✔✔1. High revenue, low margin: Walmart
generates huge sales ($600B+) but keeps a very small slice as profit (Net Income small
compared to sales)
2. SG&A (Selling, General, Administrative): This includes all store costs (wages for
greeters, electricity, advertising). Huge number for retail
✔✔Walmart vs Startups (Cash Flow) - ✔✔1. Operating Cash flow: Walmart Generates
massive positive cash from operations ($36B) because they are a mature "cash cow"
2. Investing Cash flow: The spend heavily on buying new assets (CAPEX), so this is
negative
3. Financing Cash Flow: They use their excess cash to pay down debt, buy back stock,
and pay dividends (Negative financing flow)
✔✔Revenue Recognition/When is it satisfied - ✔✔The top line of the income statement.
Revenue recognized when the performance obligation is satisfied
✔✔5 step model (Revenue Recognition) - ✔✔1. Identify contract
2. Identify performance obligations
3. Determine transaction price
4. Allocate Price among obligations
5. Recognize Revenue
✔✔Cash (classification & what is it) - ✔✔Current Asset, currency/checking accounts
✔✔Cash Equivalents (classification & what is it) - ✔✔Current Asset, Short-term
investments with maturity < 3 months
✔✔Restricted Cash (classification & what is it) - ✔✔Current Asset, Cash set aside for
specific purposes
✔✔Accounts Receivable (classification & what is it) - ✔✔Current Asset, funds owed by
customers from credit sales reported at Net Realizable Value (NRV)
