WALL STREET PREP FINANCIAL STATEMENT MODELING – 170+ QUESTIONS AND ANSWERS (2025 UPDATE)

WALL STREET PREP FINANCIAL STATEMENT
MODELING – 170+ QUESTIONS AND ANSWERS
(2025 UPDATE)


Liquidity Ratios - CORRECT ANSWER ✅✅✅measures of a firm's short-term
ability to meet its current obligations


Profitability Ratios - CORRECT ANSWER ✅✅✅measures of a firm's
profitability relative to its assets (operating efficiency) and to its revenue
(operating profitability)


Activity Ratios - CORRECT ANSWER ✅✅✅Measure of efficiency of a firm's
assets


Solvency Ratios - CORRECT ANSWER ✅✅✅Measure of a firm's ability to
pay its obligations


Inventory Turnover - CORRECT ANSWER ✅✅✅COGS / avg inventory


Receivables Turnover - CORRECT ANSWER ✅✅✅revenue / average
accounts receivable


DSO (Days Sales Outstanding) - CORRECT ANSWER ✅✅✅AR/Credit Sales *
days in period
days in period/receivables turnover

,A/P turnover - CORRECT ANSWER ✅✅✅COGS / Average A/P


PPP (payables purchasing period) - CORRECT ANSWER ✅✅✅days in
period/ Accounts payable turnover


Current Ratio - CORRECT ANSWER ✅✅✅current assets/current liabilities


Quick ratio (acid test) - CORRECT ANSWER ✅✅✅Cash and AR divided by
current liabilities


Gross profit margin - CORRECT ANSWER ✅✅✅gross profit/revenue


operating margin - CORRECT ANSWER ✅✅✅operating profit/revenue


net profit margin - CORRECT ANSWER ✅✅✅net income/revenue


asset turnover - CORRECT ANSWER ✅✅✅revenue/ average assets


return on assets (ROA) - CORRECT ANSWER ✅✅✅Net Income / Average
Assets


return on equity (ROE) - CORRECT ANSWER ✅✅✅net income/ total equity


Basic EPS - CORRECT ANSWER ✅✅✅(Net Income - Preferred
Dividends)/(Weighted Average of Shares Outstanding)

, Diluted EPS - CORRECT ANSWER ✅✅✅diluted net income / weighted
average diluted shares outstanding


dividend yield - CORRECT ANSWER ✅✅✅dividends/net income


debt to EBITDA - CORRECT ANSWER ✅✅✅Total Debt/EBITDA


interest coverage ratio - CORRECT ANSWER ✅✅✅EBIT/ interest expense


fixed charge coverage - CORRECT ANSWER ✅✅✅(EBIT + Lease
charges)/(Interest Payments + Lease charges)


Debt to Total Assets - CORRECT ANSWER ✅✅✅Total Debt/Total Assets


debt to equity - CORRECT ANSWER ✅✅✅total liabilities/total equity


cash from operations (CFO) - CORRECT ANSWER ✅✅✅uses net income as
a starting point and converts accrual base net income into cash flow from
operations via a series of adjustments


cash from investing activities (CFI) - CORRECT ANSWER ✅✅✅capital
expenditures / asset sales and purchases


cash from financing activities (CFF) - CORRECT ANSWER ✅✅✅new
borrowing / pay down of debt / new issuance of stock / share repurchases /
issuance of dividends


working capital - CORRECT ANSWER ✅✅✅-CFO