FIN 3704- FINANCIAL MANAGEMENT EXAM QUESTIONS
WITH CORRECT WELL VERIFIED ANSWERS GRADED A+
CF From Investing - ✔✔ Gross, not net
Notes for Investing - ✔✔ Add back depreciation because it is gross, but if you see net, add
depreciation
GFA= NFA=AD
=(NFA2-NFA1)+(AD2-AD1)= Dep. Expense
CF Financing - ✔✔
Net Cash Flow - ✔✔ Change
liquidity ratios - ✔✔ high values imply high probability of being able to pay off debts
Debt Management Ratios - ✔✔ Debt ratio = Total debt (Liability)/Total assets
Finance - ✔✔ Finance: the process of transferring money from
savers to borrowers through financial markets/institutions.
Difference Subject Areas in Finance - ✔✔ Investment (Savers)
Corporate Finance (Borrowers)
Financial Markets & Institutions (Intermediaries)
,3 main forms of business organizations with bonus - ✔✔ There are three main forms of business
organizations:
1. Sole Proprietorship
2. Partnership
3. Corporations
Limited liability Companies (LLC) is hybrid between partnership and corporation.
Proprietorship and Partnership Adv and Dis - ✔✔ Advantages:
Easy to form
Few regulations
Lower tax
Disadvantages:
Unlimited liability
Limited life
Difficult to raise capital
Corporation Adv. and Disadvantage - ✔✔ Advantages:
1. Limited liability
2. Unlimited life
3. Easy to raise capital
Disadvantages:
, 1. Hard to form
2. More regulations
3. High tax
4. Agency problem
Finance within a corporation - ✔✔
Times Interest Earned (TIE) = EBIT/Interest charges
Large Debt Ratio High probability of default
Large TIE Low probability of default
Asset Management Ratios - ✔✔ If low, Inventory turnover is below industry average.
Might carry old inventory, or its control might be poor.
DSO = Receivables/Avg. sales per day
= Receivables/(Annual sales/365)
Profitability Ratios - ✔✔
Dupont Equation - ✔✔
WITH CORRECT WELL VERIFIED ANSWERS GRADED A+
CF From Investing - ✔✔ Gross, not net
Notes for Investing - ✔✔ Add back depreciation because it is gross, but if you see net, add
depreciation
GFA= NFA=AD
=(NFA2-NFA1)+(AD2-AD1)= Dep. Expense
CF Financing - ✔✔
Net Cash Flow - ✔✔ Change
liquidity ratios - ✔✔ high values imply high probability of being able to pay off debts
Debt Management Ratios - ✔✔ Debt ratio = Total debt (Liability)/Total assets
Finance - ✔✔ Finance: the process of transferring money from
savers to borrowers through financial markets/institutions.
Difference Subject Areas in Finance - ✔✔ Investment (Savers)
Corporate Finance (Borrowers)
Financial Markets & Institutions (Intermediaries)
,3 main forms of business organizations with bonus - ✔✔ There are three main forms of business
organizations:
1. Sole Proprietorship
2. Partnership
3. Corporations
Limited liability Companies (LLC) is hybrid between partnership and corporation.
Proprietorship and Partnership Adv and Dis - ✔✔ Advantages:
Easy to form
Few regulations
Lower tax
Disadvantages:
Unlimited liability
Limited life
Difficult to raise capital
Corporation Adv. and Disadvantage - ✔✔ Advantages:
1. Limited liability
2. Unlimited life
3. Easy to raise capital
Disadvantages:
, 1. Hard to form
2. More regulations
3. High tax
4. Agency problem
Finance within a corporation - ✔✔
Times Interest Earned (TIE) = EBIT/Interest charges
Large Debt Ratio High probability of default
Large TIE Low probability of default
Asset Management Ratios - ✔✔ If low, Inventory turnover is below industry average.
Might carry old inventory, or its control might be poor.
DSO = Receivables/Avg. sales per day
= Receivables/(Annual sales/365)
Profitability Ratios - ✔✔
Dupont Equation - ✔✔
