Wall Street Prep Accounting Exam 2023 Questions and Answers with complete solution

1. Liquidity Ratios: measures of a firm's short-term ability to meet its current obligations 2. Profitability Ratios: measures of a firm's profitability relative to its assets (op- erating efficiency) and to its revenue (operating profitability) 3. Activity Ratios: Measure of efficiency of a firm's assets 4. Solvency Ratios: Measure of a firm's ability to pay its obligations 5. Inventory Turnover: COGS / avg inventory 6. Receivables Turnover: revenue / average accounts receivable 7. DSO (Days Sales Outstanding): AR/Credit Sales * days in period days in period/receivables turnover 8. A/P turnover: COGS / Average A/P 9. PPP (payables purchasing period): days in period/ Accounts payable turnover 10. Current Ratio: current assets/current liabilities 11. Quick ratio (acid test): Cash and AR divided by current liabilities 12. Gross profit margin: gross profit/revenue 13. operating margin: operating profit/revenue 14. net profit margin: net income/revenue 15. asset turnover: revenue/ average assets 16. return on assets (ROA): Net Income / Average Assets 17. return on equity (ROE): net income/ total equity 18. Basic EPS: (Net Income - Preferred Dividends)/(Weighted Average of Shares Outstanding) 19. Diluted EPS: diluted net income / weighted average diluted shares outstanding 20. dividend yield: dividends/net income 21. debt to EBITDA: Total Debt/EBITDA 22. interest coverage ratio: EBIT/ interest expense 23. fixed charge coverage: (EBIT + Lease charges)/(Interest Payments + Lease charges) 24. Debt to Total Assets: Total Debt/Total Assets 25. debt to equity: total liabilities/total equity 26. cash from operations (CFO): uses net income as a starting point and con- verts accrual base net income into cash flow from operations via a series of adjustments 27. cash from investing activities (CFI): capital expenditures / asset sales and purchases 28. cash from financing activities (CFF): new borrowing / pay down of debt / new issuance of stock / share repurchases / issuance of dividends 29. working capital: -CFO -increase in current assets = cash outflow -increase in current liabilities = cash inflow 30. asset write downs / impairments: -added back to CFS via CFO 31. Increases in A/R, inventory, prepaid expenses, other current assets should be net income to get to CFO: subtracted 32. increases in A/P, accrued expenses, other current liabilities should be net income to get to CFO: added 33. gains on sale of assets: subtracted from CFO