MBA 620 EVALUATION EXAM 2026 QUESTIONS AND
SOLUTIONS RATED A+
✔✔common-size statement - ✔✔A standardized financial statement presenting all items
in percentage terms instead of total dollars. There are common size balance sheets and
income statements
✔✔Compounding - ✔✔process of leaving your money and any accumulated interest in
an investment for more than one period, thereby reinvesting the interest.
✔✔Compounding Interest - ✔✔Earning interest on interest
✔✔simple interest - ✔✔Interest earned only on the original principal amount invested
✔✔Discounting - ✔✔The process of finding the present value of a cash flow or a series
of cash flows; discounting is the reverse of compounding.
✔✔DuPont Identity - ✔✔popular expression breaking ROE into three parts: operating
efficiency (as measured by profit margin), asset use efficiency (as measured by total
asset turnover), and financial leverage (as measured by equity multiplier).
✔✔Effective Annual Rate (EAR) - ✔✔the interest rate expressed as if it were
compounded once per year
✔✔Internal Growth Rate - ✔✔the maximum growth rate a firm can achieve without
external financing of any kind
✔✔Sustainable Growth Rate - ✔✔the maximum growth rate a firm can achieve without
external equity financing while maintaining a constant debt-equity ratio
✔✔Income Statement - ✔✔financial statement summarizing a firm's performance over a
period of time
✔✔interest-only loans - ✔✔borrower pays interest each period and repays the entire
principal at some point in the future
✔✔nominal interest rate - ✔✔interest rates that have not been adjusted for inflation
✔✔real interest rate - ✔✔the interest rate corrected for the effects of inflation
✔✔Fisher effect - ✔✔the relationship between nominal rates, real rates, and inflation.
✔✔Liquidity - ✔✔refers to the speed and ease with which an asset can be converted to
cash
SOLUTIONS RATED A+
✔✔common-size statement - ✔✔A standardized financial statement presenting all items
in percentage terms instead of total dollars. There are common size balance sheets and
income statements
✔✔Compounding - ✔✔process of leaving your money and any accumulated interest in
an investment for more than one period, thereby reinvesting the interest.
✔✔Compounding Interest - ✔✔Earning interest on interest
✔✔simple interest - ✔✔Interest earned only on the original principal amount invested
✔✔Discounting - ✔✔The process of finding the present value of a cash flow or a series
of cash flows; discounting is the reverse of compounding.
✔✔DuPont Identity - ✔✔popular expression breaking ROE into three parts: operating
efficiency (as measured by profit margin), asset use efficiency (as measured by total
asset turnover), and financial leverage (as measured by equity multiplier).
✔✔Effective Annual Rate (EAR) - ✔✔the interest rate expressed as if it were
compounded once per year
✔✔Internal Growth Rate - ✔✔the maximum growth rate a firm can achieve without
external financing of any kind
✔✔Sustainable Growth Rate - ✔✔the maximum growth rate a firm can achieve without
external equity financing while maintaining a constant debt-equity ratio
✔✔Income Statement - ✔✔financial statement summarizing a firm's performance over a
period of time
✔✔interest-only loans - ✔✔borrower pays interest each period and repays the entire
principal at some point in the future
✔✔nominal interest rate - ✔✔interest rates that have not been adjusted for inflation
✔✔real interest rate - ✔✔the interest rate corrected for the effects of inflation
✔✔Fisher effect - ✔✔the relationship between nominal rates, real rates, and inflation.
✔✔Liquidity - ✔✔refers to the speed and ease with which an asset can be converted to
cash
