HBX Core Final Exam 2023-2024
Net Present Value - ANSWER Is a calculation of the present values of all the cash inflows and
outflows of a project or investment.
Excel formula =NPV(E4,B3:B12)+B2
Remember,for NPV you have to manually add the negative outflow from time zero related to
the initial investment.
Asset/Expense Accounts - ANSWER Asset and expense accounts increase with debit and
decrease with credit.
Income Statement - ANSWER Shows a company's financial performance, because it shows
the accumulation of all nominal accounts over a period of time.
Gross Profit - ANSWER Sales Revenue minus COGS.
Accounts Payable Turnover - ANSWER Credit Purchases/Average Accounts Payable Balance.
Internal Rate of Return (IRR) - ANSWER The discount rate that sets the net present value
(NPV) of a project equal to zero. The IRR allows us to find the percentage rate that would be
earned for a given set of cash flows.
Gross Profit Margin Calculation - ANSWER Gross Profit/Revenue =Gross Profit Margin
Leverage Ratio Calculation - ANSWER Average Total Assets/Average Equity.
Suggested Formula =Average (B11,D5)/Average (Sum(B16:B18),D8).
Present Value Calculation - ANSWER It is calculated by multiplying the annual payment by
the present value of an annuity factor.
$18,000*6.71008=$120,781
Return on Equity (ROE) - ANSWER The return that a business generates during a period on
equity invested in the business by the owners of the business.
Measured in DuPont Framework.
Return on Investment (ROI) - ANSWER The return or profit received as a result of investing
funds.
Not measured by the DuPont Framework.
, Cash Conversion Cycle (CCC) - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER 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.
Profit Margin - ANSWER (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 - ANSWER 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 - ANSWER 365/AR Turnover =365/(Credit Sales/ Average AR
Balance)
Current Ratio - ANSWER The current ratio is a measure of a business' ability to pay its short
term obligations.
Quick Ratio - ANSWER measures the ability of a company to use its quick assets to pay off
its short-term debts.
Debt to Equity Ratio - ANSWER measures a company's leverage, not ability to pay off its
debts.
Indirect Method to create the Statement of Cash Flows - ANSWER A gain, an increase in
operating assets, and a decrease in operating current liabilities would all need to be
subtracted from net income in order to convert net income into operating cash flow when
using the indirect method to create the Statement of Cash Flows.
Net Present Value - ANSWER Is a calculation of the present values of all the cash inflows and
outflows of a project or investment.
Excel formula =NPV(E4,B3:B12)+B2
Remember,for NPV you have to manually add the negative outflow from time zero related to
the initial investment.
Asset/Expense Accounts - ANSWER Asset and expense accounts increase with debit and
decrease with credit.
Income Statement - ANSWER Shows a company's financial performance, because it shows
the accumulation of all nominal accounts over a period of time.
Gross Profit - ANSWER Sales Revenue minus COGS.
Accounts Payable Turnover - ANSWER Credit Purchases/Average Accounts Payable Balance.
Internal Rate of Return (IRR) - ANSWER The discount rate that sets the net present value
(NPV) of a project equal to zero. The IRR allows us to find the percentage rate that would be
earned for a given set of cash flows.
Gross Profit Margin Calculation - ANSWER Gross Profit/Revenue =Gross Profit Margin
Leverage Ratio Calculation - ANSWER Average Total Assets/Average Equity.
Suggested Formula =Average (B11,D5)/Average (Sum(B16:B18),D8).
Present Value Calculation - ANSWER It is calculated by multiplying the annual payment by
the present value of an annuity factor.
$18,000*6.71008=$120,781
Return on Equity (ROE) - ANSWER The return that a business generates during a period on
equity invested in the business by the owners of the business.
Measured in DuPont Framework.
Return on Investment (ROI) - ANSWER The return or profit received as a result of investing
funds.
Not measured by the DuPont Framework.
, Cash Conversion Cycle (CCC) - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER 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.
Profit Margin - ANSWER (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 - ANSWER 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 - ANSWER 365/AR Turnover =365/(Credit Sales/ Average AR
Balance)
Current Ratio - ANSWER The current ratio is a measure of a business' ability to pay its short
term obligations.
Quick Ratio - ANSWER measures the ability of a company to use its quick assets to pay off
its short-term debts.
Debt to Equity Ratio - ANSWER measures a company's leverage, not ability to pay off its
debts.
Indirect Method to create the Statement of Cash Flows - ANSWER A gain, an increase in
operating assets, and a decrease in operating current liabilities would all need to be
subtracted from net income in order to convert net income into operating cash flow when
using the indirect method to create the Statement of Cash Flows.
