HBX Core Final Exam
Net Present Value - answer Is a calculation of the present values of all the cash inflows
and outflows of a project or investment.
Excel formula =NPV(E4,B3:B12)+B2
Remember, for NPV you have to manually add the negative outflow from time zero
related to the initial investment.
Asset/Expense Accounts - answer Asset and expense accounts increase with debit and
decrease with credit.
Income Statement - answer Shows a company's financial performance, because it
shows the accumulation of all nominal accounts over a period of time.
Gross Profit - answer Sales Revenue minus COGS.
Accounts Payable Turnover - answer Credit Purchases/Average Accounts Payable
Balance.
Internal Rate of Return (IRR) - answerThe discount rate that sets the net present value
(NPV) of a project equal to zero. The IRR allows us to find the percentage rate that
would be earned for a given set of cash flows.
Gross Profit Margin Calculation - answerGross Profit/Revenue =Gross Profit Margin
Leverage Ratio Calculation - answerAverage Total Assets/Average Equity.
Suggested Formula =Average (B11,D5)/Average (Sum(B16:B18),D8).
Present Value Calculation - answerIt is calculated by multiplying the annual payment by
the present value of an annuity factor.
$18,000*6.71008=$120,781
Return on Equity (ROE) - answerThe return that a business generates during a period
on equity invested in the business by the owners of the business.
Measured in DuPont Framework.
Return on Investment (ROI) - answerThe return or profit received as a result of investing
funds.
, Not measured by the DuPont Framework.
Cash Conversion Cycle (CCC) - answerThe number of days between when a company
pays for inventory purchases and when a company collects from customers.
Not measured by the DuPont Framework.
Interest Coverage Ratio - answerThe number of times a company can cover its interest
expense only using its earnings before interest and tax.
Not part of the DuPont Framework.
Deferred Tax Asset - answerArises when taxable income exceeds Income Before Taxes
due to a temporary timing difference.
When a deferred Tax Asset arises it means a company is recognizing Tax Expense now
on an amount of income that will be reflected in the financial records later.
Income Before Taxes - answerThe amount shown on the Income Statement after all
expenses have been taken away from the revenue for the period but before any tax
expense for the period. May also be referred to as Pretax Profit.
Profit Margin - answer(Net Income/Sales ) measures the ability of a company to make a
profit relative to revenue generated during a period. A Profit Margin of 19% tells us that
for every $100 in sales, $19 ended up in Net Income.
Profit Margin - answerProfit Margin (Net Income/Sales) measures the ability of a
company to make a profit relative to revenue generated during a period.
In Excel Net Income/Revenue.
Average Collection Period - answer365/AR Turnover =365/(Credit Sales/ Average AR
Balance)
Current Ratio - answerThe current ratio is a measure of a business' ability to pay its
short term obligations.
Quick Ratio - answermeasures the ability of a company to use its quick assets to pay off
its short-term debts.
Debt to Equity Ratio - answermeasures a company's leverage, not ability to pay off its
debts.
Indirect Method to create the Statement of Cash Flows - answerA gain, an increase in
operating assets, and a decrease in operating current liabilities would all need to be
Net Present Value - answer Is a calculation of the present values of all the cash inflows
and outflows of a project or investment.
Excel formula =NPV(E4,B3:B12)+B2
Remember, for NPV you have to manually add the negative outflow from time zero
related to the initial investment.
Asset/Expense Accounts - answer Asset and expense accounts increase with debit and
decrease with credit.
Income Statement - answer Shows a company's financial performance, because it
shows the accumulation of all nominal accounts over a period of time.
Gross Profit - answer Sales Revenue minus COGS.
Accounts Payable Turnover - answer Credit Purchases/Average Accounts Payable
Balance.
Internal Rate of Return (IRR) - answerThe discount rate that sets the net present value
(NPV) of a project equal to zero. The IRR allows us to find the percentage rate that
would be earned for a given set of cash flows.
Gross Profit Margin Calculation - answerGross Profit/Revenue =Gross Profit Margin
Leverage Ratio Calculation - answerAverage Total Assets/Average Equity.
Suggested Formula =Average (B11,D5)/Average (Sum(B16:B18),D8).
Present Value Calculation - answerIt is calculated by multiplying the annual payment by
the present value of an annuity factor.
$18,000*6.71008=$120,781
Return on Equity (ROE) - answerThe return that a business generates during a period
on equity invested in the business by the owners of the business.
Measured in DuPont Framework.
Return on Investment (ROI) - answerThe return or profit received as a result of investing
funds.
, Not measured by the DuPont Framework.
Cash Conversion Cycle (CCC) - answerThe number of days between when a company
pays for inventory purchases and when a company collects from customers.
Not measured by the DuPont Framework.
Interest Coverage Ratio - answerThe number of times a company can cover its interest
expense only using its earnings before interest and tax.
Not part of the DuPont Framework.
Deferred Tax Asset - answerArises when taxable income exceeds Income Before Taxes
due to a temporary timing difference.
When a deferred Tax Asset arises it means a company is recognizing Tax Expense now
on an amount of income that will be reflected in the financial records later.
Income Before Taxes - answerThe amount shown on the Income Statement after all
expenses have been taken away from the revenue for the period but before any tax
expense for the period. May also be referred to as Pretax Profit.
Profit Margin - answer(Net Income/Sales ) measures the ability of a company to make a
profit relative to revenue generated during a period. A Profit Margin of 19% tells us that
for every $100 in sales, $19 ended up in Net Income.
Profit Margin - answerProfit Margin (Net Income/Sales) measures the ability of a
company to make a profit relative to revenue generated during a period.
In Excel Net Income/Revenue.
Average Collection Period - answer365/AR Turnover =365/(Credit Sales/ Average AR
Balance)
Current Ratio - answerThe current ratio is a measure of a business' ability to pay its
short term obligations.
Quick Ratio - answermeasures the ability of a company to use its quick assets to pay off
its short-term debts.
Debt to Equity Ratio - answermeasures a company's leverage, not ability to pay off its
debts.
Indirect Method to create the Statement of Cash Flows - answerA gain, an increase in
operating assets, and a decrease in operating current liabilities would all need to be
