FINANCIAL STATEMENT MODELLING TEST BANK
COMPLETE QUESTIONS AND CORRECT DETAILED
ANSWERS RATED A+.
✅What is the primary purpose of the equity schedule in our model? Answer: To calculate
the necessary inputs that feed into our cash flow from financing activities,
To calculate share repurchases for the cash flow build,
To calculate dividends for the cash flow build
✅What metric do we use to project our dividends? Answer: Dividend payout ratio
✅Which dividend payout ratio did we use in our projection period? Answer: 33.8%
✅What is the change of cash formula in our model? Answer: Cash Flow from Ops + Cash
Flow from Investing + Cash Flow From Financing
✅Are share repurchases a source or a use of cash? Answer: Use
✅Are option proceeds a source or use of cash? Answer: Source
✅What is the last step in creating our debt paydown and interest schedule? Answer:
Interest Calculation
✅What happens if our cash available for mandatory debt paydown is negative? Answer: We
must draw on the revolver
✅If no additional debt is raised and there are fixed, annual debt payments, what will
happen to short-term debt from year to year? Answer: Stay the same
, ✅Which of the below accurately describes the revolver logic in our model? Answer: Nike
needs cash - draw on revolver,
Nike does not need cash - pay down revolver if there is a balance,
Nike does not need cash - do nothing if there is no revolver balance
✅Why is the revolver interest rate lower than our long-term interest rate? Answer: It has
higher seniority
✅What balance did we use for debt to calculate our annual interest expense? Answer:
Average of beginning and ending balance of debt
✅What interest rate did we use for the interest income on our cash? Answer: 0.50%
✅What is the main source of circularity in our model? Answer: The debt / interest schedule
✅What is the driver for the number of shares that we repurchase? Answer: Projected P/E
multiple,
The $ amount of shares to be repurchased,
Projected share price
✅How did we calculate historical dilutive securities outstanding? Answer: Dilutive Shares
Outstanding - Basic Shares outstanding
✅How did we calculate EPS in our model? Answer: Net income / diluted shares outstanding
✅What did we use as our projected P/E multiple? Answer: 33x
✅Which formula below will give us share price? Answer: Price / Earnings * Earnings /
Diluted Shares Outstanding
P/E * EPS
COMPLETE QUESTIONS AND CORRECT DETAILED
ANSWERS RATED A+.
✅What is the primary purpose of the equity schedule in our model? Answer: To calculate
the necessary inputs that feed into our cash flow from financing activities,
To calculate share repurchases for the cash flow build,
To calculate dividends for the cash flow build
✅What metric do we use to project our dividends? Answer: Dividend payout ratio
✅Which dividend payout ratio did we use in our projection period? Answer: 33.8%
✅What is the change of cash formula in our model? Answer: Cash Flow from Ops + Cash
Flow from Investing + Cash Flow From Financing
✅Are share repurchases a source or a use of cash? Answer: Use
✅Are option proceeds a source or use of cash? Answer: Source
✅What is the last step in creating our debt paydown and interest schedule? Answer:
Interest Calculation
✅What happens if our cash available for mandatory debt paydown is negative? Answer: We
must draw on the revolver
✅If no additional debt is raised and there are fixed, annual debt payments, what will
happen to short-term debt from year to year? Answer: Stay the same
, ✅Which of the below accurately describes the revolver logic in our model? Answer: Nike
needs cash - draw on revolver,
Nike does not need cash - pay down revolver if there is a balance,
Nike does not need cash - do nothing if there is no revolver balance
✅Why is the revolver interest rate lower than our long-term interest rate? Answer: It has
higher seniority
✅What balance did we use for debt to calculate our annual interest expense? Answer:
Average of beginning and ending balance of debt
✅What interest rate did we use for the interest income on our cash? Answer: 0.50%
✅What is the main source of circularity in our model? Answer: The debt / interest schedule
✅What is the driver for the number of shares that we repurchase? Answer: Projected P/E
multiple,
The $ amount of shares to be repurchased,
Projected share price
✅How did we calculate historical dilutive securities outstanding? Answer: Dilutive Shares
Outstanding - Basic Shares outstanding
✅How did we calculate EPS in our model? Answer: Net income / diluted shares outstanding
✅What did we use as our projected P/E multiple? Answer: 33x
✅Which formula below will give us share price? Answer: Price / Earnings * Earnings /
Diluted Shares Outstanding
P/E * EPS
