Fin 340 UPDATED ACTUAL Exam
Questions and CORRECT Answers
The four basic financial statements contained in the annual report - CORRECT
ANSWER - balance sheet, income statement , stockholders equity , statement of cash
flows
3 aspects of cash flows that affect investment value - CORRECT ANSWER - Financial
asset derived from the amount of cash flows (bigger is better)
Timing of cash flows stream (sooner better)
Investors are risk adverse ( pay more for less risk)
Net cash flow differs from accounting profit because - CORRECT ANSWER - some of
the revenues and expenses shown in accounting profit is not yet received or paid out
Net cash flow is - CORRECT ANSWER - net income + depreciation
Operating current assets does NOT include - CORRECT ANSWER - short term
investments
Operating current assets does include - CORRECT ANSWER - cash, inventory and
receivables
Operating current liabilities - CORRECT ANSWER - accounts payable and accruals
WACC - CORRECT ANSWER - average rate of return required by all company investors
WACC - CORRECT ANSWER - Affected by capital structure
Interest rates
, Risk of the firm
Investors attitude toward risk
Net operating working capital - CORRECT ANSWER - difference from operating current
assets and liabilities
Operating long term assets - CORRECT ANSWER - support operations such as net plant
and equipment
Total net operating capital - CORRECT ANSWER - total amount of capital needed to run
the business
NOPAT - CORRECT ANSWER - after tax profit a company would have if it had no debt
and no investments on non operating assets, better measure of performance than net income
Return on Invested capital - CORRECT ANSWER - It measures the rate of return that the
operations are generating . best measure of operating performance
Free Cash flow - CORRECT ANSWER - amount of cash flow available for distribution to
investors , NOPAT minus total net operating capital
5 uses of fcf - CORRECT ANSWER - Pay interest to debt holders, repay debt holders, pay
dividends, repurchase stock, buy short term investments
MVA - CORRECT ANSWER - represents the difference between the total market value
of a firm and the total amount of investor supplied capital, if market value of debt and preferred
stock equa l values reported in financial statements then MVA is the difference between the
market value of a forms stock and the amount of equity its shareholders have
Questions and CORRECT Answers
The four basic financial statements contained in the annual report - CORRECT
ANSWER - balance sheet, income statement , stockholders equity , statement of cash
flows
3 aspects of cash flows that affect investment value - CORRECT ANSWER - Financial
asset derived from the amount of cash flows (bigger is better)
Timing of cash flows stream (sooner better)
Investors are risk adverse ( pay more for less risk)
Net cash flow differs from accounting profit because - CORRECT ANSWER - some of
the revenues and expenses shown in accounting profit is not yet received or paid out
Net cash flow is - CORRECT ANSWER - net income + depreciation
Operating current assets does NOT include - CORRECT ANSWER - short term
investments
Operating current assets does include - CORRECT ANSWER - cash, inventory and
receivables
Operating current liabilities - CORRECT ANSWER - accounts payable and accruals
WACC - CORRECT ANSWER - average rate of return required by all company investors
WACC - CORRECT ANSWER - Affected by capital structure
Interest rates
, Risk of the firm
Investors attitude toward risk
Net operating working capital - CORRECT ANSWER - difference from operating current
assets and liabilities
Operating long term assets - CORRECT ANSWER - support operations such as net plant
and equipment
Total net operating capital - CORRECT ANSWER - total amount of capital needed to run
the business
NOPAT - CORRECT ANSWER - after tax profit a company would have if it had no debt
and no investments on non operating assets, better measure of performance than net income
Return on Invested capital - CORRECT ANSWER - It measures the rate of return that the
operations are generating . best measure of operating performance
Free Cash flow - CORRECT ANSWER - amount of cash flow available for distribution to
investors , NOPAT minus total net operating capital
5 uses of fcf - CORRECT ANSWER - Pay interest to debt holders, repay debt holders, pay
dividends, repurchase stock, buy short term investments
MVA - CORRECT ANSWER - represents the difference between the total market value
of a firm and the total amount of investor supplied capital, if market value of debt and preferred
stock equa l values reported in financial statements then MVA is the difference between the
market value of a forms stock and the amount of equity its shareholders have
