WALL STREET PREP ACTUAL 10 2026
FINANCIAL MODELING AND VALUATION
COMPREHENSIVE REVIEW AND STUDY GUIDE
◉ Profitability Ratios.
Answer: measures of a firm's profitability relative to its assets
(operating efficiency) and to its revenue (operating profitability)
◉ Activity Ratios.
Answer: Measure of efficiency of a firm's assets
◉ Solvency Ratios.
Answer: Measure of a firm's ability to pay its obligations
◉ Inventory Turnover.
Answer: COGS / avg inventory
◉ Receivables Turnover.
Answer: revenue / average accounts receivable
◉ DSO (Days Sales Outstanding).
,Answer: AR/Credit Sales * days in period
days in period/receivables turnover
◉ A/P turnover.
Answer: COGS / Average A/P
◉ PPP (payables purchasing period).
Answer: days in period/ Accounts payable turnover
◉ Current Ratio.
Answer: current assets/current liabilities
◉ Quick ratio (acid test).
Answer: Cash and AR divided by current liabilities
◉ Gross profit margin.
Answer: gross profit/revenue
◉ operating margin.
Answer: operating profit/revenue
◉ net profit margin.
,Answer: net income/revenue
◉ asset turnover.
Answer: revenue/ average assets
◉ return on assets (ROA).
Answer: Net Income / Average Assets
◉ return on equity (ROE).
Answer: net income/ total equity
◉ Basic EPS.
Answer: (Net Income - Preferred Dividends)/(Weighted Average of
Shares Outstanding)
◉ Diluted EPS.
Answer: diluted net income / weighted average diluted shares
outstanding
◉ dividend yield.
Answer: dividends/net income
, ◉ debt to EBITDA.
Answer: Total Debt/EBITDA
◉ interest coverage ratio.
Answer: EBIT/ interest expense
◉ fixed charge coverage.
Answer: (EBIT + Lease charges)/(Interest Payments + Lease
charges)
◉ Debt to Total Assets.
Answer: Total Debt/Total Assets
◉ debt to equity.
Answer: total liabilities/total equity
◉ cash from operations (CFO).
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).
FINANCIAL MODELING AND VALUATION
COMPREHENSIVE REVIEW AND STUDY GUIDE
◉ Profitability Ratios.
Answer: measures of a firm's profitability relative to its assets
(operating efficiency) and to its revenue (operating profitability)
◉ Activity Ratios.
Answer: Measure of efficiency of a firm's assets
◉ Solvency Ratios.
Answer: Measure of a firm's ability to pay its obligations
◉ Inventory Turnover.
Answer: COGS / avg inventory
◉ Receivables Turnover.
Answer: revenue / average accounts receivable
◉ DSO (Days Sales Outstanding).
,Answer: AR/Credit Sales * days in period
days in period/receivables turnover
◉ A/P turnover.
Answer: COGS / Average A/P
◉ PPP (payables purchasing period).
Answer: days in period/ Accounts payable turnover
◉ Current Ratio.
Answer: current assets/current liabilities
◉ Quick ratio (acid test).
Answer: Cash and AR divided by current liabilities
◉ Gross profit margin.
Answer: gross profit/revenue
◉ operating margin.
Answer: operating profit/revenue
◉ net profit margin.
,Answer: net income/revenue
◉ asset turnover.
Answer: revenue/ average assets
◉ return on assets (ROA).
Answer: Net Income / Average Assets
◉ return on equity (ROE).
Answer: net income/ total equity
◉ Basic EPS.
Answer: (Net Income - Preferred Dividends)/(Weighted Average of
Shares Outstanding)
◉ Diluted EPS.
Answer: diluted net income / weighted average diluted shares
outstanding
◉ dividend yield.
Answer: dividends/net income
, ◉ debt to EBITDA.
Answer: Total Debt/EBITDA
◉ interest coverage ratio.
Answer: EBIT/ interest expense
◉ fixed charge coverage.
Answer: (EBIT + Lease charges)/(Interest Payments + Lease
charges)
◉ Debt to Total Assets.
Answer: Total Debt/Total Assets
◉ debt to equity.
Answer: total liabilities/total equity
◉ cash from operations (CFO).
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).
