WSP CRASH COURSE IN ACCOUNTIN EVALUATION QUESTIONS
WITH ANSWERS 2025/2026 GRADED A+
Straight-Line Depreciation - (Original Cost - Salvage Value) / Useful Life
Treasury Stock - Shares that have been issues, but subsequently repurchased by the
company; a contra account on the Balance Sheet under Shareholder's Equity
Diluted Shares Outstanding - Includes the impact of security holders that expand the
share base, like stock option holders and preferred shareholders that can convert their
preferred shares to common stock
Diluted - __________ EPS is favored approach because it is more economically "real"
and will almost always be smaller than basic EPS
Operating Income - Also known as Earnings Before Interest & Taxes (EBIT), this is a
metric that allows the comparison of similar types of businesses by subtracting all
operating expenses from revenues
EBITDA - Adds back depreciation and amortization expense to operating income in
order to provide a more accurate picture of profits during the year
Retained Earnings; Dividends - The Income Statement is linked to the Balance Sheet
via __________, which is equal to the balance at the beginning of the year, plus Net
Income, less any __________ paid
Capital Expenditures - Net purchases of Property, Plant, & Equipment
LIFO; Lower - The tax benefit of ________ is what makes it preferable for many U.S.
companies to use as a method of inventory costing in periods of rising inventory prices
(overstates COGS and decreases Net Income, leading to an overall __________ tax
burden)
LIFO Reserve - The difference between the value of inventory under LIFO and FIFO
methods; required to state when a company values inventory using the LIFO method
Lower of Cost or Market (LCM) Rule - Dictates that if the market value of inventory falls
below historical costs, they must be written down to market value
Goodwill - Effectively an accounting plug, this is the amount by which the purchase
price for a company exceeds its fair market value (FMV), representing the "intangible"
value stemming from the acquired company's business name, customer relations,
employee moral, etc.
Preferred Stock - Class of stock that takes priority over common stock and has special
rights such as priority over dividends and claims on assets in bankruptcy; often
, structured to include the possibility of conversion into common stock at a pre-set
exchange rate
Additional Paid In Capital (APIC) - Represents the excess value of the share issued
over par value
Other Comprehensive Income (OCI) - An equity line item on the B/S that captures the
accumulation of income or loss that a company has recognized over time that is not
recognized directly on the I/S and thus not captured in RE
Cash From Operations (CFO) - The amount of cash that went into the company's
pocket as a result of doing business; Net Income + D&A - Increases in Current Assets +
Increases in Current Liabilities
Cash From Investing Activities (CFI) - Tracks additions and reductions to fixed assets
and investment during the year; includes: capex (outflow), purchases of intangible
assets (outflow), asset sales (inflow), and purchases and sales of debt and equity
securities (inflow/outflow)
Cash From Financing Activities (CFF) - Tracks changes in the company's sources of
debt and equity financing; includes: issuance/repayment of debt (cash inflow/outflow),
common stock issues/repurchased (inflow/outflow), and payment of common and
preferred dividends (cash outflow)
Operating Margin - Operating Income (EBIT) / Revenue
Net Profit Margin - Net Income / Revenue
Asset Turnover - Revenue / Average Assets
Return on Assets (ROA) - Net Income / Average Assets
Return on Equity (ROE) - Net Income / Total Equity; takes out effect of leverage
Liquidity Ratios - Measures a company's short-term ability to meet current obligations
(e.g. - Quick Ratio, Current Ratio)
Profitability Ratios - Measures a company's profitability relative to its assets (operating
efficiency) and to its revenues (operating profitability); e.g. - Gross Profit Margin,
Operating Margin, EPS
Activity Ratios - Measure of efficiency of a company's assets (e.g. - Receivables
Turnover, Days Sales Outstanding)
Solvency (Coverage) Ratios - Measure of a company's ability to repay its debt
obligations (e.g. - Debt to EBITDA, Interest Coverage Ratio)
WITH ANSWERS 2025/2026 GRADED A+
Straight-Line Depreciation - (Original Cost - Salvage Value) / Useful Life
Treasury Stock - Shares that have been issues, but subsequently repurchased by the
company; a contra account on the Balance Sheet under Shareholder's Equity
Diluted Shares Outstanding - Includes the impact of security holders that expand the
share base, like stock option holders and preferred shareholders that can convert their
preferred shares to common stock
Diluted - __________ EPS is favored approach because it is more economically "real"
and will almost always be smaller than basic EPS
Operating Income - Also known as Earnings Before Interest & Taxes (EBIT), this is a
metric that allows the comparison of similar types of businesses by subtracting all
operating expenses from revenues
EBITDA - Adds back depreciation and amortization expense to operating income in
order to provide a more accurate picture of profits during the year
Retained Earnings; Dividends - The Income Statement is linked to the Balance Sheet
via __________, which is equal to the balance at the beginning of the year, plus Net
Income, less any __________ paid
Capital Expenditures - Net purchases of Property, Plant, & Equipment
LIFO; Lower - The tax benefit of ________ is what makes it preferable for many U.S.
companies to use as a method of inventory costing in periods of rising inventory prices
(overstates COGS and decreases Net Income, leading to an overall __________ tax
burden)
LIFO Reserve - The difference between the value of inventory under LIFO and FIFO
methods; required to state when a company values inventory using the LIFO method
Lower of Cost or Market (LCM) Rule - Dictates that if the market value of inventory falls
below historical costs, they must be written down to market value
Goodwill - Effectively an accounting plug, this is the amount by which the purchase
price for a company exceeds its fair market value (FMV), representing the "intangible"
value stemming from the acquired company's business name, customer relations,
employee moral, etc.
Preferred Stock - Class of stock that takes priority over common stock and has special
rights such as priority over dividends and claims on assets in bankruptcy; often
, structured to include the possibility of conversion into common stock at a pre-set
exchange rate
Additional Paid In Capital (APIC) - Represents the excess value of the share issued
over par value
Other Comprehensive Income (OCI) - An equity line item on the B/S that captures the
accumulation of income or loss that a company has recognized over time that is not
recognized directly on the I/S and thus not captured in RE
Cash From Operations (CFO) - The amount of cash that went into the company's
pocket as a result of doing business; Net Income + D&A - Increases in Current Assets +
Increases in Current Liabilities
Cash From Investing Activities (CFI) - Tracks additions and reductions to fixed assets
and investment during the year; includes: capex (outflow), purchases of intangible
assets (outflow), asset sales (inflow), and purchases and sales of debt and equity
securities (inflow/outflow)
Cash From Financing Activities (CFF) - Tracks changes in the company's sources of
debt and equity financing; includes: issuance/repayment of debt (cash inflow/outflow),
common stock issues/repurchased (inflow/outflow), and payment of common and
preferred dividends (cash outflow)
Operating Margin - Operating Income (EBIT) / Revenue
Net Profit Margin - Net Income / Revenue
Asset Turnover - Revenue / Average Assets
Return on Assets (ROA) - Net Income / Average Assets
Return on Equity (ROE) - Net Income / Total Equity; takes out effect of leverage
Liquidity Ratios - Measures a company's short-term ability to meet current obligations
(e.g. - Quick Ratio, Current Ratio)
Profitability Ratios - Measures a company's profitability relative to its assets (operating
efficiency) and to its revenues (operating profitability); e.g. - Gross Profit Margin,
Operating Margin, EPS
Activity Ratios - Measure of efficiency of a company's assets (e.g. - Receivables
Turnover, Days Sales Outstanding)
Solvency (Coverage) Ratios - Measure of a company's ability to repay its debt
obligations (e.g. - Debt to EBITDA, Interest Coverage Ratio)
