WALL STREET PREP PREMIUM EXAM WITH ALL ANSWERS
WhatVisVgenerallyVnotVconsideredVtoVbeVaVpre-taxVnon-
recurringV(unusualVorVinfrequent)Vitem?V-VcorrectVanswer-ExtraordinaryVgains/losses
whatVisVfalseVaboutVdepreciationVandVamortizationV-VcorrectVanswer-
D&AVmayVbeVclassifiedVwithinVinterestVexpense
CompanyVX'sVcurrentVassetsVincreasedVbyV$40VmillionVfromV2007-
2008VwhileVtheVcompaniesVcurrentVliabilitiesVincreasedVbyV$25VmillionVoverVtheVsameVp
eriod.VtheVcashVimpactVofVtheVchangeVinVworkingVcapitalVwasV-VcorrectVanswer-
aVdecreaseVofV15Vmillion
theVfinalVcomponentVofVanVearningsVprojectionVmodelVisVcalculatingVinterestVexpense.Vt
heVcalculationVmayVcreateVaVcircularVreferenceVbecauseV-VcorrectVanswer-
interestVexpenseVaffectsVnetVincome,VwhichVaffectsVFCF,VwhichVaffectsVtheVamountVofV
debtVaVcompanyVpaysVdown,Vwhich,VinVturnVaffectsVtheVinterestVexpense,VhenceVtheVcir
cularVreference
aV10-qVfinancialVfilingVhasVallVofVtheVfollowingVcharacteristicsVexceptV-VcorrectVanswer-
issuedVfourVtimesVaVyear.
DepreciationVExpenseVfoundVinVtheVSG&AVlineVofVtheVincomeVstatementVforVaVmanufac
turingVfirmVwouldVmostVlikelyVbeVattributableVtoVwhichVofVtheVfollowingV-VcorrectVanswer-
computersVusedVbyVtheVaccountingVdepartment
IfVaVcompanyVhasVprojectedVrevenuesVofV$10Vbillion,VaVgrossVprofitVmarginVofV65%,Vand
VprojectedVSG&AVexpensesVofV$2billion,VwhatVisVtheVcompany'sVoperatingV(EBIT)Vmarg
in?V-VcorrectVanswer-45%
AVcompanyVhasVtheVfollowingVinformation,V1.V2014VrevenuesVofV$5Vbillion,2013VAccou
ntsVreceivableVofV$400Vmillion,V2014VaccountsVreceivableVofV$600Vmillion,VwhatVareVthe
VdaysVsalesVoutstandingV-VcorrectVanswer-36.5
AVcompanyVhasVtheVfollowingVinformation:
•V2014VRevenuesVofV$8Vbillion
•V2014VCOGSVofV$5Vbillion
•V2013VAccountsVreceivableVofV$400Vmillion
•V2014VAccountsVreceivableVofV$600Vmillion
, •V2013VInventoriesVofV$1Vbillion
•V2014VInventoriesVofV$800Vmillion
•V2013VAccountsVpayableVofV$250Vmillion
•V2014VAccountsVpayableVofV$300Vmillion
WhatVareVtheVinventoryVdaysVforVtheVcompany?V-VcorrectVanswer-65.7Vdays
WhichVofVtheVfollowingVisVtrueV-VcorrectVanswer-
CocaVCola'sVbrandVnameVisVnotVreflectedVasVanVintangibleVassetVonVitsVbalanceVsheet
AVcompanyVhasVtheVfollowingVinformation:
•V2014VshareVrepurchaseVplanVofV$4Vbillion
•VAverageVshareVpriceVofV$60VforVtheVyearV2013
•VExpectedVEPSVgrowthVforV2014VofV10%
WhatVshouldVtheVnumberVofVsharesVrepurchasedVbyVtheVcompanyVbeVinVyourVfinancialV
model?V-VcorrectVanswer-60.6Vmillion
non-controllingVinterestV-VcorrectVanswer-
isVanVexpenseVonVtheVincomeVstatementVandVequityVoVtheVbalanceVsheet
AVcompanyVhasVtheVfollowingVinformation:
•V2013VretainedVearningsVbalanceVofV$12Vbillion
•VNetVincomeVofV$3.5VbillionVinV2014
•VCapexVofV$200VmillionVinV2014
•VPreferredVdividendsVofV$100VmillionVinV2014
•VCommonVdividendsVofV$400VmillionVinV2014
WhatVisVtheVretainedVearningsVbalanceVatVtheVendVofV2014?V-VcorrectVanswer-15Vbillion
inVorderVtoVfindVoutVhowVmuchVcashVisVavailableVtoVpayVdownVshortVtermVdebt,VsuchVasV
revolvingVcreditVline,VyouVmustVtakeV-VcorrectVanswer-beginningVcashVbalanceV+Vpre-
debtVcashVflowsV-Vmin.VcashVbalanceV-
VrequiredVprincipalVpaymentsVofVLTVandVotherVdebt
toVcalculateVinterestVexpenseVinVtheVfuture,VyouVshouldVdoVwhichVofVtheVfollowingV-
VcorrectVanswer-
applyVaVweightedVaverageVinterestVrateVtimesVtheVaverageVdebtVbalanceVoverVtheVcour
seVofVtheVyear
enterpriseV(transaction)VvalueVrepresentsVthe:V-VcorrectVanswer-
valueVofVallVcapitalVinvestedVinVaVbusiness
AVdebtVholderVwouldVbeVprimarilyVconcernedVwithVwhichVofVtheVfollowingVmultiples?
I.VEnterpriseV(Transaction)VValueV/VEBITDA
II.VPrice/Earnings
III.VEnterpriseV(Transaction)VValueV/VSalesV-VcorrectVanswer-1VandV3Vonly
OnVJanuaryV1,V2014,VsharesVofVCompanyVXVtradeVatV$6.50VperVshare,VwithV400VmillionV
sharesVoutstanding.VTheVcompanyVhasVnetVdebtVofV$300Vmillion.VAfterVbuildingVanVear
ningsVmodelVforVCompanyVX,VyouVhaveVprojectedVfreeVcashVflowVforVeachVyearVthrough
V2020VasVfollows:
WhatVisVgenerallyVnotVconsideredVtoVbeVaVpre-taxVnon-
recurringV(unusualVorVinfrequent)Vitem?V-VcorrectVanswer-ExtraordinaryVgains/losses
whatVisVfalseVaboutVdepreciationVandVamortizationV-VcorrectVanswer-
D&AVmayVbeVclassifiedVwithinVinterestVexpense
CompanyVX'sVcurrentVassetsVincreasedVbyV$40VmillionVfromV2007-
2008VwhileVtheVcompaniesVcurrentVliabilitiesVincreasedVbyV$25VmillionVoverVtheVsameVp
eriod.VtheVcashVimpactVofVtheVchangeVinVworkingVcapitalVwasV-VcorrectVanswer-
aVdecreaseVofV15Vmillion
theVfinalVcomponentVofVanVearningsVprojectionVmodelVisVcalculatingVinterestVexpense.Vt
heVcalculationVmayVcreateVaVcircularVreferenceVbecauseV-VcorrectVanswer-
interestVexpenseVaffectsVnetVincome,VwhichVaffectsVFCF,VwhichVaffectsVtheVamountVofV
debtVaVcompanyVpaysVdown,Vwhich,VinVturnVaffectsVtheVinterestVexpense,VhenceVtheVcir
cularVreference
aV10-qVfinancialVfilingVhasVallVofVtheVfollowingVcharacteristicsVexceptV-VcorrectVanswer-
issuedVfourVtimesVaVyear.
DepreciationVExpenseVfoundVinVtheVSG&AVlineVofVtheVincomeVstatementVforVaVmanufac
turingVfirmVwouldVmostVlikelyVbeVattributableVtoVwhichVofVtheVfollowingV-VcorrectVanswer-
computersVusedVbyVtheVaccountingVdepartment
IfVaVcompanyVhasVprojectedVrevenuesVofV$10Vbillion,VaVgrossVprofitVmarginVofV65%,Vand
VprojectedVSG&AVexpensesVofV$2billion,VwhatVisVtheVcompany'sVoperatingV(EBIT)Vmarg
in?V-VcorrectVanswer-45%
AVcompanyVhasVtheVfollowingVinformation,V1.V2014VrevenuesVofV$5Vbillion,2013VAccou
ntsVreceivableVofV$400Vmillion,V2014VaccountsVreceivableVofV$600Vmillion,VwhatVareVthe
VdaysVsalesVoutstandingV-VcorrectVanswer-36.5
AVcompanyVhasVtheVfollowingVinformation:
•V2014VRevenuesVofV$8Vbillion
•V2014VCOGSVofV$5Vbillion
•V2013VAccountsVreceivableVofV$400Vmillion
•V2014VAccountsVreceivableVofV$600Vmillion
, •V2013VInventoriesVofV$1Vbillion
•V2014VInventoriesVofV$800Vmillion
•V2013VAccountsVpayableVofV$250Vmillion
•V2014VAccountsVpayableVofV$300Vmillion
WhatVareVtheVinventoryVdaysVforVtheVcompany?V-VcorrectVanswer-65.7Vdays
WhichVofVtheVfollowingVisVtrueV-VcorrectVanswer-
CocaVCola'sVbrandVnameVisVnotVreflectedVasVanVintangibleVassetVonVitsVbalanceVsheet
AVcompanyVhasVtheVfollowingVinformation:
•V2014VshareVrepurchaseVplanVofV$4Vbillion
•VAverageVshareVpriceVofV$60VforVtheVyearV2013
•VExpectedVEPSVgrowthVforV2014VofV10%
WhatVshouldVtheVnumberVofVsharesVrepurchasedVbyVtheVcompanyVbeVinVyourVfinancialV
model?V-VcorrectVanswer-60.6Vmillion
non-controllingVinterestV-VcorrectVanswer-
isVanVexpenseVonVtheVincomeVstatementVandVequityVoVtheVbalanceVsheet
AVcompanyVhasVtheVfollowingVinformation:
•V2013VretainedVearningsVbalanceVofV$12Vbillion
•VNetVincomeVofV$3.5VbillionVinV2014
•VCapexVofV$200VmillionVinV2014
•VPreferredVdividendsVofV$100VmillionVinV2014
•VCommonVdividendsVofV$400VmillionVinV2014
WhatVisVtheVretainedVearningsVbalanceVatVtheVendVofV2014?V-VcorrectVanswer-15Vbillion
inVorderVtoVfindVoutVhowVmuchVcashVisVavailableVtoVpayVdownVshortVtermVdebt,VsuchVasV
revolvingVcreditVline,VyouVmustVtakeV-VcorrectVanswer-beginningVcashVbalanceV+Vpre-
debtVcashVflowsV-Vmin.VcashVbalanceV-
VrequiredVprincipalVpaymentsVofVLTVandVotherVdebt
toVcalculateVinterestVexpenseVinVtheVfuture,VyouVshouldVdoVwhichVofVtheVfollowingV-
VcorrectVanswer-
applyVaVweightedVaverageVinterestVrateVtimesVtheVaverageVdebtVbalanceVoverVtheVcour
seVofVtheVyear
enterpriseV(transaction)VvalueVrepresentsVthe:V-VcorrectVanswer-
valueVofVallVcapitalVinvestedVinVaVbusiness
AVdebtVholderVwouldVbeVprimarilyVconcernedVwithVwhichVofVtheVfollowingVmultiples?
I.VEnterpriseV(Transaction)VValueV/VEBITDA
II.VPrice/Earnings
III.VEnterpriseV(Transaction)VValueV/VSalesV-VcorrectVanswer-1VandV3Vonly
OnVJanuaryV1,V2014,VsharesVofVCompanyVXVtradeVatV$6.50VperVshare,VwithV400VmillionV
sharesVoutstanding.VTheVcompanyVhasVnetVdebtVofV$300Vmillion.VAfterVbuildingVanVear
ningsVmodelVforVCompanyVX,VyouVhaveVprojectedVfreeVcashVflowVforVeachVyearVthrough
V2020VasVfollows: