WALL STREET PREP ADVANCED
ACCOUNTING EXAM PAPER COMPLETE
QUESTIONS CORRECT ANSWERS
◉ 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). Answer: capital expenditures
/ asset sales and purchases
◉ cash from financing activities (CFF). Answer: new borrowing /
pay down of debt / new issuance of stock / share repurchases /
issuance of dividends
◉ working capital. Answer: -CFO
-increase in current assets = cash outflow
-increase in current liabilities = cash inflow
◉ asset write downs / impairments. Answer: -added back to CFS via
CFO
◉ Increases in A/R, inventory, prepaid expenses, other current
assets should be _____________ net income to get to CFO. Answer:
subtracted
◉ increases in A/P, accrued expenses, other current liabilities
should be ____________ net income to get to CFO. Answer: added
◉ gains on sale of assets. Answer: subtracted from CFO
◉ stock based compensation. Answer: added to CFO
ACCOUNTING EXAM PAPER COMPLETE
QUESTIONS CORRECT ANSWERS
◉ 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). Answer: capital expenditures
/ asset sales and purchases
◉ cash from financing activities (CFF). Answer: new borrowing /
pay down of debt / new issuance of stock / share repurchases /
issuance of dividends
◉ working capital. Answer: -CFO
-increase in current assets = cash outflow
-increase in current liabilities = cash inflow
◉ asset write downs / impairments. Answer: -added back to CFS via
CFO
◉ Increases in A/R, inventory, prepaid expenses, other current
assets should be _____________ net income to get to CFO. Answer:
subtracted
◉ increases in A/P, accrued expenses, other current liabilities
should be ____________ net income to get to CFO. Answer: added
◉ gains on sale of assets. Answer: subtracted from CFO
◉ stock based compensation. Answer: added to CFO
