Finance 201 Brau Exam 1 Questions and Correct
Answers
Corporate Finance, Investments, Institutions
3 Sub-Specialties of Finance
based on matching principle of revenue and expenses
What is accrual based accounting?
It is what is listed on the books
Why is historical cost important?
The price paid at the time of acquisition
What is historical cost on the books?
Balance Sheet, Income Statement, Statement of Cash Flows
What are the 3 Accounting documents we use?
NI = Div + RE
How does the IS carry over to the BS?
LIFO and FIFO
What are the 2 types of inventory management.
EBIT - tax + depreciation - CAPEX - Increase in NWC
FCFF =
NI + Depreciation - CAPEX - Increase in NWC + Increase in net LTD
FCFE =
,Free Cash Flow to Firm
What does FCFF stand for?
Free Cash Flow to Equity
What does FCFE stand for?
NOPAT - [WACC x (Costly Capital)]
EVA =
ROE = NI/S x S/A x A/E
DuPont =
EBIT - Tax
What is NOPAT?
all interest bearing debt plus equity
What is costly capital?
Trend/time-series, cross-sectional, goals
What are the 3 ways to use ratio analysis
Liquidity, Efficiency, Financing, Profitability
What are the types of Ratios
CA/CL
Current Ratio (CR) =
(CA-Inv)/CL
Quick Ratio (QR) =
, AR/DCS
Average Collection Period (ACP) =
CS/AR
AR Turnover (ART) =
COGS/Inv
Inventory Turnover (IV) =
S/TA
Total Asset Turnover (TAT) =
S/FA
Fixed Asset Turnover (FAT) =
EBIT/TA
OIROI =
D/A
Debt Ratio (DR) =
D/E
Debt to Equity =
EBIT/Interest Expense
Times Interest Earned (TIE) =
NI/A
Return on Assets (ROA) =
Answers
Corporate Finance, Investments, Institutions
3 Sub-Specialties of Finance
based on matching principle of revenue and expenses
What is accrual based accounting?
It is what is listed on the books
Why is historical cost important?
The price paid at the time of acquisition
What is historical cost on the books?
Balance Sheet, Income Statement, Statement of Cash Flows
What are the 3 Accounting documents we use?
NI = Div + RE
How does the IS carry over to the BS?
LIFO and FIFO
What are the 2 types of inventory management.
EBIT - tax + depreciation - CAPEX - Increase in NWC
FCFF =
NI + Depreciation - CAPEX - Increase in NWC + Increase in net LTD
FCFE =
,Free Cash Flow to Firm
What does FCFF stand for?
Free Cash Flow to Equity
What does FCFE stand for?
NOPAT - [WACC x (Costly Capital)]
EVA =
ROE = NI/S x S/A x A/E
DuPont =
EBIT - Tax
What is NOPAT?
all interest bearing debt plus equity
What is costly capital?
Trend/time-series, cross-sectional, goals
What are the 3 ways to use ratio analysis
Liquidity, Efficiency, Financing, Profitability
What are the types of Ratios
CA/CL
Current Ratio (CR) =
(CA-Inv)/CL
Quick Ratio (QR) =
, AR/DCS
Average Collection Period (ACP) =
CS/AR
AR Turnover (ART) =
COGS/Inv
Inventory Turnover (IV) =
S/TA
Total Asset Turnover (TAT) =
S/FA
Fixed Asset Turnover (FAT) =
EBIT/TA
OIROI =
D/A
Debt Ratio (DR) =
D/E
Debt to Equity =
EBIT/Interest Expense
Times Interest Earned (TIE) =
NI/A
Return on Assets (ROA) =
