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Exam (elaborations)

Essentials Of Corporate Finance Ross Key Concepts And Practice Questions

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Essentials Of Corporate Finance Ross Key Concepts And Practice Questions

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ESSENTIALS OF CORPORATE FINANCE ROSS
KEY CONCEPTS AND PRACTICE QUESTIONS

◉ Income Statement Equation.
Answer: Revenues-Expenses=Income


◉ Cash Flow Identity.
Answer: Cash flow from assets=Cash flow to creditors+Cash flow to
stockholders


◉ Cash Flow from Assets.
Answer: Cash flow from assets=Operating cash flow-Net capital
spending-Change in net working capital


◉ Operating Cash Flow.
Answer: Operating cash flow=Earnings before interest and
taxes+Depreciation-Taxes


◉ Net Capital Spending.
Answer: Net capital spending=Ending net fixed assets-Beginning net
fixed assets+Depreciation

, ◉ Change in Net Working Capital.
Answer: Change in net working capital=Ending NWC-Beginning
NWC


◉ Cash Flow to Creditors.
Answer: Cash flow to creditors=Interest paid-Net new borrowing


◉ Cash Flow to Stockholders.
Answer: Cash flow to stockholders=Dividend paid-Net new equity
raised


◉ Current Ratio.
Answer: Current assets/Current liabilities


◉ Quick, or Acid-Test, Ratio.
Answer: Current assets-Inventory/Current liabilities


◉ Cash Ratio.
Answer: Cash/Current liabilities


◉ Total Debt Ratio.
Answer: Total assets-Total equity/Total assets

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