Adventis Financial Modeling Level 1
Certification Questions & Answers
Income Statement - ANSWERSPresents the results of operations over a period of time,
typically monthly, quarterly and/or annually
Income Statement - ANSWERSThe purpose is to show stakeholders whether the
company made or lost money during the period being reported, and it indicates how
revenues are transformed into net income
Income Statement - ANSWERSDisplays revenues recognized for a specific period of
time and the expenses charged against those revenues
Revenue (Sales) - ANSWERSThe amount charged for the delivery of goods or services
Cost of Sales (Cost of Goods Sold) - ANSWERSThe direct cost of producing revenue
(raw materials, direct wages, etc.)
Gross Profit - ANSWERScalculated as revenue less cost of sales and indicates how
efficiently labor and supplies are used in the production process
Operating Expenses - ANSWERSAll other expenses required to run the business
(management salaries, marketing, travel, etc.)
Operating Income (EBIT) - ANSWERSCalculated as revenue less cost of sales and
operating expenses and indicates a company's earning power from ongoing operations
Non-Operating Expenses - ANSWERSExpenses or income not related to the regular
business of the company (interest expense, restructuring expenses, etc.)
Corporate Taxes - ANSWERSLocal and federal income taxes the company incurs
Net Income (Net Earnings) - ANSWERSCalculated as revenue less all expenses of the
company and indicates the increase in shareholders' value resulting from operations
Balance Sheet - ANSWERSShows and organization's financial position at a particular
point in time
Balance Sheet - ANSWERSDiscloses the resources an organization controls (assets)
and the claims on those resources (liabilities and equity)
Assets - ANSWERSWhat a company owns
, Liabilities - ANSWERSWhat a company owes
Equity - ANSWERSAny remaining claims of shareholders against a company
Basic Accounting Equation - ANSWERSAssets = Liabilities + Equity
Accrual Accounting Method - ANSWERSMeasures the performance of a company
regardless of when cash transactions occur. This method is the standard accounting
practice for companies
Cash - ANSWERSCurrent assets comprising currency or currency equivalents that can
be accessed immediately
Accounts Receivable - ANSWERSThe amount owed to an organization from the sale of
its products or services
Fixed Assets - ANSWERSThe value of assets and property that cannot easily be
converted to cash and has a useful life of greater than 1 year (Property, Plant &
Equipment)
Accounts Payable - ANSWERSThe amount owed to an organization's vendors
Debt - ANSWERSThe amount of obligations owed to creditors
Equity - ANSWERSCumulative shareholder investment plus cumulative net income
Working Capital - ANSWERSA measure of a company's efficiency and its short-term
financial health
Working Capital - ANSWERSCalculated as non-cash current assets less non-debt
current liabilities
Non-Cash Current Assets - ANSWERSRepresent all assets besides cash that are
expected to be converted into cash within a year. These assets appear on the
company's balance sheet and include accounts receivable, inventory, prepaid
expenses, and other assets
Non-Debt Current Liabilities - ANSWERSRepresent all obligations besides short-term
debt that are due within one-year. They appear on the company's balance sheet and
include accounts payable, accrued liabilities, and other obligations
Debt - ANSWERS-Less expensive, and less risky form of capital
-Has priority claims on the company's assets if the company goes bankrupt
Equity - ANSWERS-More expensive, and more risky form of capital; therefore, investors
require a higher rate of return to mitigate their risk
Certification Questions & Answers
Income Statement - ANSWERSPresents the results of operations over a period of time,
typically monthly, quarterly and/or annually
Income Statement - ANSWERSThe purpose is to show stakeholders whether the
company made or lost money during the period being reported, and it indicates how
revenues are transformed into net income
Income Statement - ANSWERSDisplays revenues recognized for a specific period of
time and the expenses charged against those revenues
Revenue (Sales) - ANSWERSThe amount charged for the delivery of goods or services
Cost of Sales (Cost of Goods Sold) - ANSWERSThe direct cost of producing revenue
(raw materials, direct wages, etc.)
Gross Profit - ANSWERScalculated as revenue less cost of sales and indicates how
efficiently labor and supplies are used in the production process
Operating Expenses - ANSWERSAll other expenses required to run the business
(management salaries, marketing, travel, etc.)
Operating Income (EBIT) - ANSWERSCalculated as revenue less cost of sales and
operating expenses and indicates a company's earning power from ongoing operations
Non-Operating Expenses - ANSWERSExpenses or income not related to the regular
business of the company (interest expense, restructuring expenses, etc.)
Corporate Taxes - ANSWERSLocal and federal income taxes the company incurs
Net Income (Net Earnings) - ANSWERSCalculated as revenue less all expenses of the
company and indicates the increase in shareholders' value resulting from operations
Balance Sheet - ANSWERSShows and organization's financial position at a particular
point in time
Balance Sheet - ANSWERSDiscloses the resources an organization controls (assets)
and the claims on those resources (liabilities and equity)
Assets - ANSWERSWhat a company owns
, Liabilities - ANSWERSWhat a company owes
Equity - ANSWERSAny remaining claims of shareholders against a company
Basic Accounting Equation - ANSWERSAssets = Liabilities + Equity
Accrual Accounting Method - ANSWERSMeasures the performance of a company
regardless of when cash transactions occur. This method is the standard accounting
practice for companies
Cash - ANSWERSCurrent assets comprising currency or currency equivalents that can
be accessed immediately
Accounts Receivable - ANSWERSThe amount owed to an organization from the sale of
its products or services
Fixed Assets - ANSWERSThe value of assets and property that cannot easily be
converted to cash and has a useful life of greater than 1 year (Property, Plant &
Equipment)
Accounts Payable - ANSWERSThe amount owed to an organization's vendors
Debt - ANSWERSThe amount of obligations owed to creditors
Equity - ANSWERSCumulative shareholder investment plus cumulative net income
Working Capital - ANSWERSA measure of a company's efficiency and its short-term
financial health
Working Capital - ANSWERSCalculated as non-cash current assets less non-debt
current liabilities
Non-Cash Current Assets - ANSWERSRepresent all assets besides cash that are
expected to be converted into cash within a year. These assets appear on the
company's balance sheet and include accounts receivable, inventory, prepaid
expenses, and other assets
Non-Debt Current Liabilities - ANSWERSRepresent all obligations besides short-term
debt that are due within one-year. They appear on the company's balance sheet and
include accounts payable, accrued liabilities, and other obligations
Debt - ANSWERS-Less expensive, and less risky form of capital
-Has priority claims on the company's assets if the company goes bankrupt
Equity - ANSWERS-More expensive, and more risky form of capital; therefore, investors
require a higher rate of return to mitigate their risk
