Financial Analyst Formulas Exam Questions with 100% Correct Answers (Latest 2023)

Tips On Good Analysis Correct Answer - Go from simple to complex -start with sales, gross margin, and net earnings; is the company growing and is it profitable - think about each piece of the formulas and what goes into them when making your hypotheses; not just the *sales* for example, what might have caused sales to change, pricing, volume, etc +break sales into into geographic region or business activities -ex. of analysis "net income is decreasing, this is bad; it is due to bad management of cost resources" then say "I recommend we do... (such as manage costs of resources better" -ex. of a recommendation "we should invest x amount over x years" then state consequences and/or how you might get the money -ex. "I would renegotiate with customers to pay sooner; I would use this cash to invest in x; I would then be sure to manage our costs of resources continuing into the future" +add possible explanations of WHY your recommendation could be wrong +consider if it is a startup...the timeline of how long or if it is generating positive net earnings (usually takes longer in beginning and initially generates negative net earnings) +CONSIDER 1. Nature of expenses, 2. Cost structure, and 3. Recurring profits Net Earnings Correct Answer Revenues - Expenses (Not 100% instant cash) +important to note if revenue is increasing at faster rate than expenses Income Statement Correct Answer a movie of activities during a period; intermediate results help to explain net earnings +COGS Correct Answer +DIRECT costs attributed to production +Sales - COGS = Gross Margin +SG&A Correct Answer +INDIRECT costs Gross Profit Correct Answer Sales (amount of goods delivered & billed) - Cost of Goods Sold (direct costs) COGS= all production costs; salaries of production workers, cost of raw materials, plant running costs, etc +DIFFERENT from OPERATING profit EBITDA Correct Answer Gross margin-Selling, administrative, etc (overhead) SGA= salaries of admin, rent, marketing, etc