Corporate Finance Exam Practice Questions with Certified Solutions

Corporate Finance Exam Practice Questions with
Certified Solutions

Financial Management Decisions - Answer -Investment Decisions

-Financing Decisions

-Payout Policy



Cash Method of Accounting - Answer Income is counted when cash is actually received, and expenses
are counted when actually paid



Accrual Method of Accounting - Answer Income is recorded when the sale occurs, and expenses are
recorded when the good/service is received



Multi-Step Income Statement - Answer Net Sales

-COGS

=Gross Profit

-Depreciation Expense

-Operating Expense

=Operating Profit (EBIT)

-Interest Expense

=Income Before Taxes (EBT)

-Tax Expenses

=Net Income



Operating Expenses - Answer -SG&A

-R&D



Depreciation Methods - Answer -Straight Line (same rate each year)

-Accelerated Cost Recovery Method (good for tax purposes)

, Non-Operating Expenses (Income) - Answer -Dividend Income

-Rental Income

-Interest Expense (Cost of Borrowing)



EPS - Answer Net Income / # Shares Outstanding



Balance Sheet - Answer Assets

Current Assets

Cash

A/R

Allowance for Doubtful Accounts

Inventories

Fixed Assets/PPE

Accumulated Depreciation



Liabilities

Current Liabilities

A/P

Accrued Expenses

Notes Payable

Current Portion of LTD

Long-Term Debt



Equity

Common Stock (@ Par)

APIC

Preferred Stock

Retained Earnings