Wall Street Prep Accounting Exam
Transaction Comps Modeling Wall Street Prep Exam –Q&A
1. Liquidity Ratios: measures of a firm's short-term ability to meet its current
obligations
2. Profitability Ratios: measures of a firm's profitability relative to its assets (oper-
ating efficiency) and to its revenue (operating profitability)
,3. Activity Ratios: Measure of efficiency of a firm's assets
4. Solvency Ratios: Measure of a firm's ability to pay its obligations
5. Inventory Turnover: COGS / avg inventory
6. Receivables Turnover: revenue / average accounts receivable 7. DSO (Days
Sales Outstanding): AR/Credit Sales * days in period days in
period/receivables turnover
8. A/P turnover: COGS / Average A/P
9. PPP (payables purchasing period): days in period/ Accounts payable
turnover
10. Current Ratio: current assets/current liabilities
11. Quick ratio (acid test): Cash and AR divided by current liabilities
12. Gross profit margin: gross profit/revenue
13. operating margin: operating profit/revenue
14. net profit margin: net income/revenue
15. asset turnover: revenue/ average assets
16. return on assets (ROA): Net Income / Average Assets
17. return on equity (ROE): net income/ total equity
18. Basic EPS: (Net Income - Preferred Dividends)/(Weighted Average of Shares
Outstanding)
,19. Diluted EPS: diluted net income / weighted average diluted shares
outstanding
20. dividend yield: dividends/net income
21. debt to EBITDA: Total Debt/EBITDA
22. interest coverage ratio: EBIT/ interest expense
23. fixed charge coverage: (EBIT + Lease charges)/(Interest Payments + Lease
charges)
24. Debt to Total Assets: Total Debt/Total Assets
25. debt to equity: total liabilities/total equity
26. cash from operations (CFO): uses net income as a starting point and
converts accrual base net income into cash flow from operations via a series of
adjustments 27. cash from investing activities (CFI): capital expenditures /
asset sales and purchases
28. cash from financing activities (CFF): new borrowing / pay down of debt / new
issuance of stock / share repurchases / issuance of dividends
29. working capital: -CFO
-increase in current assets = cash outflow
-increase in current liabilities = cash inflow
, What is generally not considered to be a pre-tax non-recurring (unusual or
infrequent) item? - Correct answer-Extraordinary gains/losses
what is false about depreciation and amortization - Correct answer-D&A may be
classified within interest expense
Company X's current assets increased by $40 million from 2007-2008 while the
companies current liabilities increased by $25 million over the same period. the
cash impact of the change in working capital was - Correct answer-a decrease of
15 million
the final component of an earnings projection model is calculating interest
expense. the calculation may create a circular reference because - Correct
answer-interest expense affects net income, which affects FCF, which affects the
amount of debt a company pays down, which, in turn affects the interest expense,
hence the circular reference
a 10-q financial filing has all of the following characteristics except - Correct
answer-issued four times a year.
Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to which of the following -
Correct answer-computers used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%,
and projected SG&A expenses of $2billion, what is the company's operating
(EBIT) margin? - Correct answer-45%
A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million,
what are the days sales outstanding - Correct answer-36.5
A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
Transaction Comps Modeling Wall Street Prep Exam –Q&A
1. Liquidity Ratios: measures of a firm's short-term ability to meet its current
obligations
2. Profitability Ratios: measures of a firm's profitability relative to its assets (oper-
ating efficiency) and to its revenue (operating profitability)
,3. Activity Ratios: Measure of efficiency of a firm's assets
4. Solvency Ratios: Measure of a firm's ability to pay its obligations
5. Inventory Turnover: COGS / avg inventory
6. Receivables Turnover: revenue / average accounts receivable 7. DSO (Days
Sales Outstanding): AR/Credit Sales * days in period days in
period/receivables turnover
8. A/P turnover: COGS / Average A/P
9. PPP (payables purchasing period): days in period/ Accounts payable
turnover
10. Current Ratio: current assets/current liabilities
11. Quick ratio (acid test): Cash and AR divided by current liabilities
12. Gross profit margin: gross profit/revenue
13. operating margin: operating profit/revenue
14. net profit margin: net income/revenue
15. asset turnover: revenue/ average assets
16. return on assets (ROA): Net Income / Average Assets
17. return on equity (ROE): net income/ total equity
18. Basic EPS: (Net Income - Preferred Dividends)/(Weighted Average of Shares
Outstanding)
,19. Diluted EPS: diluted net income / weighted average diluted shares
outstanding
20. dividend yield: dividends/net income
21. debt to EBITDA: Total Debt/EBITDA
22. interest coverage ratio: EBIT/ interest expense
23. fixed charge coverage: (EBIT + Lease charges)/(Interest Payments + Lease
charges)
24. Debt to Total Assets: Total Debt/Total Assets
25. debt to equity: total liabilities/total equity
26. cash from operations (CFO): uses net income as a starting point and
converts accrual base net income into cash flow from operations via a series of
adjustments 27. cash from investing activities (CFI): capital expenditures /
asset sales and purchases
28. cash from financing activities (CFF): new borrowing / pay down of debt / new
issuance of stock / share repurchases / issuance of dividends
29. working capital: -CFO
-increase in current assets = cash outflow
-increase in current liabilities = cash inflow
, What is generally not considered to be a pre-tax non-recurring (unusual or
infrequent) item? - Correct answer-Extraordinary gains/losses
what is false about depreciation and amortization - Correct answer-D&A may be
classified within interest expense
Company X's current assets increased by $40 million from 2007-2008 while the
companies current liabilities increased by $25 million over the same period. the
cash impact of the change in working capital was - Correct answer-a decrease of
15 million
the final component of an earnings projection model is calculating interest
expense. the calculation may create a circular reference because - Correct
answer-interest expense affects net income, which affects FCF, which affects the
amount of debt a company pays down, which, in turn affects the interest expense,
hence the circular reference
a 10-q financial filing has all of the following characteristics except - Correct
answer-issued four times a year.
Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to which of the following -
Correct answer-computers used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%,
and projected SG&A expenses of $2billion, what is the company's operating
(EBIT) margin? - Correct answer-45%
A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million,
what are the days sales outstanding - Correct answer-36.5
A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
