HBX Core Final Exam Questions And
Answers|Latest Update
Cash Conversion Cycle (CCC) The number of days between when a company pays for
inventory purchases and when a company collects from customers.
Not measured by the DuPont Framework.
Interest Coverage Ratio The number of times a company can cover its interest expense
only using its earnings before interest and tax.
Not part of the DuPont Framework.
Deferred Tax Asset Arises when taxable income exceeds Income Before Taxes due to a
temporary timing difference.
When a deferred Tax Asset arises it means a company is recognizing Tax Expense now on an
amount of income that will be reflected in the financial records later.
Income Before Taxes The amount shown on the Income Statement after all expenses have
been taken away from the revenue for the period but before any tax expense for the period. May
also be referred to as Pretax Profit.
, HBX Core Final Exam Questions And
Answers|Latest Update
Profit Margin (Net Income/Sales ) measures the ability of a company to make a profit
relative to revenue generated during a period. A Profit Margin of 19% tells us that for every $100
in sales, $19 ended up in Net Income.
Profit Margin Profit Margin (Net Income/Sales) measures the ability of a company to
make a profit relative to revenue generated during a period.
In Excel Net Income/Revenue.
Average Collection Period 365/AR Turnover =365/(Credit Sales/ Average AR Balance)
Current Ratio The current ratio is a measure of a business' ability to pay its short term
obligations.
Quick Ratio measures the ability of a company to use its quick assets to pay off its short-
term debts.
Debt to Equity Ratio measures a company's leverage, not ability to pay off its debts.
Indirect Method to create the Statement of Cash Flows A gain, an increase in operating
assets, and a decrease in operating current liabilities would all need to be subtracted from net
Answers|Latest Update
Cash Conversion Cycle (CCC) The number of days between when a company pays for
inventory purchases and when a company collects from customers.
Not measured by the DuPont Framework.
Interest Coverage Ratio The number of times a company can cover its interest expense
only using its earnings before interest and tax.
Not part of the DuPont Framework.
Deferred Tax Asset Arises when taxable income exceeds Income Before Taxes due to a
temporary timing difference.
When a deferred Tax Asset arises it means a company is recognizing Tax Expense now on an
amount of income that will be reflected in the financial records later.
Income Before Taxes The amount shown on the Income Statement after all expenses have
been taken away from the revenue for the period but before any tax expense for the period. May
also be referred to as Pretax Profit.
, HBX Core Final Exam Questions And
Answers|Latest Update
Profit Margin (Net Income/Sales ) measures the ability of a company to make a profit
relative to revenue generated during a period. A Profit Margin of 19% tells us that for every $100
in sales, $19 ended up in Net Income.
Profit Margin Profit Margin (Net Income/Sales) measures the ability of a company to
make a profit relative to revenue generated during a period.
In Excel Net Income/Revenue.
Average Collection Period 365/AR Turnover =365/(Credit Sales/ Average AR Balance)
Current Ratio The current ratio is a measure of a business' ability to pay its short term
obligations.
Quick Ratio measures the ability of a company to use its quick assets to pay off its short-
term debts.
Debt to Equity Ratio measures a company's leverage, not ability to pay off its debts.
Indirect Method to create the Statement of Cash Flows A gain, an increase in operating
assets, and a decrease in operating current liabilities would all need to be subtracted from net
