8/15/25, 12:00 AM WSP ACCOUNTING -WALL STREET PREP EXAM QUESTIONS AND VERIFIED ANSWERS 2025(GRADED A+) DETAILED AN…
WSP ACCOUNTING -WALL STREET PREP EXAM
QUESTIONS AND VERIFIED ANSWERS
2025(GRADED A+) DETAILED ANSWERS!!
measures of a firm's short-term ability to meet its
Liquidity Ratios
current obligations
measures of a firm's profitability relative to its assets
Profitability Ratios (operating efficiency) and to its revenue (operating
profitability)
Activity Ratios Measure of efficiency of a firm's assets
Solvency Ratios Measure of a firm's ability to pay its obligations
Inventory Turnover COGS / avg inventory
Receivables Turnover revenue / average accounts receivable
DSO (Days Sales AR/Credit Sales * days in period
Outstanding) days in period/receivables turnover
A/P turnover COGS / Average A/P
PPP (payables purchasing days in period/ Accounts payable turnover
period)
Current Ratio current assets/current liabilities
Quick ratio (acid test) Cash and AR divided by current liabilities
Gross profit margin gross profit/revenue
1/20
,8/15/25, 12:00 AM WSP ACCOUNTING -WALL STREET PREP EXAM QUESTIONS AND VERIFIED ANSWERS 2025(GRADED A+) DETAILED AN…
operating margin operating profit/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
(Net Income - Preferred Dividends)/(Weighted
Basic EPS
Average of Shares Outstanding)
diluted net income / weighted average diluted shares
Diluted EPS
outstanding
dividend yield dividends/net income
debt to EBITDA Total Debt/EBITDA
interest coverage ratio EBIT/ interest expense
(EBIT + Lease charges)/(Interest Payments + Lease
fixed charge coverage
charges)
Debt to Total Assets Total Debt/Total Assets
debt to equity total liabilities/total equity
uses net income as a starting point and converts
cash from operations
accrual base net income into cash flow from
(CFO)
operations via a series of adjustments
cash from investing capital expenditures / asset sales and purchases
activities (CFI)
cash from financing new borrowing / pay down of debt / new issuance of
activities (CFF) stock / share repurchases / issuance of dividends
-CFO
working capital -increase in current assets = cash outflow
-increase in current liabilities = cash inflow
asset write downs / -added back to CFS via CFO
impairments
2/20
, 8/15/25, 12:00 AM WSP ACCOUNTING -WALL STREET PREP EXAM QUESTIONS AND VERIFIED ANSWERS 2025(GRADED A+) DETAILED AN…
Increases in A/R, subtracted
inventory, prepaid
expenses, other current
assets should be _____________
net income to get to CFO
increases in A/P, accrued added
expenses, other current
liabilities should be
________ net income to
get to CFO
gains on sale of assets subtracted from CFO
stock based added to CFO
compensation
- capital expenditures
- purchases of intangible assets
Common CFI
+ asset sales
inflows/outflows
+ sales of debt/ equity security
- purchases of debt/equity security
-Issuance / repayment of debt (cash inflow / outflow)
-Common stock issued / repurchased (cash inflow /
Common CFS
outflow)
inflows/outflows
-Payment of common & preferred dividends (cash
outflow)
Assumptions of accounting entity, going concern, measurement,
Accounting periodicity
1. Historical Cost
2. Revenue Recognition
principles of accounting
3. Matching Principle
4. Full Disclosure
1. Estimates and judgements
2. materiality
constraints of accounting
3. consistency
4. conservatism
3/20
WSP ACCOUNTING -WALL STREET PREP EXAM
QUESTIONS AND VERIFIED ANSWERS
2025(GRADED A+) DETAILED ANSWERS!!
measures of a firm's short-term ability to meet its
Liquidity Ratios
current obligations
measures of a firm's profitability relative to its assets
Profitability Ratios (operating efficiency) and to its revenue (operating
profitability)
Activity Ratios Measure of efficiency of a firm's assets
Solvency Ratios Measure of a firm's ability to pay its obligations
Inventory Turnover COGS / avg inventory
Receivables Turnover revenue / average accounts receivable
DSO (Days Sales AR/Credit Sales * days in period
Outstanding) days in period/receivables turnover
A/P turnover COGS / Average A/P
PPP (payables purchasing days in period/ Accounts payable turnover
period)
Current Ratio current assets/current liabilities
Quick ratio (acid test) Cash and AR divided by current liabilities
Gross profit margin gross profit/revenue
1/20
,8/15/25, 12:00 AM WSP ACCOUNTING -WALL STREET PREP EXAM QUESTIONS AND VERIFIED ANSWERS 2025(GRADED A+) DETAILED AN…
operating margin operating profit/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
(Net Income - Preferred Dividends)/(Weighted
Basic EPS
Average of Shares Outstanding)
diluted net income / weighted average diluted shares
Diluted EPS
outstanding
dividend yield dividends/net income
debt to EBITDA Total Debt/EBITDA
interest coverage ratio EBIT/ interest expense
(EBIT + Lease charges)/(Interest Payments + Lease
fixed charge coverage
charges)
Debt to Total Assets Total Debt/Total Assets
debt to equity total liabilities/total equity
uses net income as a starting point and converts
cash from operations
accrual base net income into cash flow from
(CFO)
operations via a series of adjustments
cash from investing capital expenditures / asset sales and purchases
activities (CFI)
cash from financing new borrowing / pay down of debt / new issuance of
activities (CFF) stock / share repurchases / issuance of dividends
-CFO
working capital -increase in current assets = cash outflow
-increase in current liabilities = cash inflow
asset write downs / -added back to CFS via CFO
impairments
2/20
, 8/15/25, 12:00 AM WSP ACCOUNTING -WALL STREET PREP EXAM QUESTIONS AND VERIFIED ANSWERS 2025(GRADED A+) DETAILED AN…
Increases in A/R, subtracted
inventory, prepaid
expenses, other current
assets should be _____________
net income to get to CFO
increases in A/P, accrued added
expenses, other current
liabilities should be
________ net income to
get to CFO
gains on sale of assets subtracted from CFO
stock based added to CFO
compensation
- capital expenditures
- purchases of intangible assets
Common CFI
+ asset sales
inflows/outflows
+ sales of debt/ equity security
- purchases of debt/equity security
-Issuance / repayment of debt (cash inflow / outflow)
-Common stock issued / repurchased (cash inflow /
Common CFS
outflow)
inflows/outflows
-Payment of common & preferred dividends (cash
outflow)
Assumptions of accounting entity, going concern, measurement,
Accounting periodicity
1. Historical Cost
2. Revenue Recognition
principles of accounting
3. Matching Principle
4. Full Disclosure
1. Estimates and judgements
2. materiality
constraints of accounting
3. consistency
4. conservatism
3/20
