D775 - SECTION 2 EXAM WITH FULL PACK SOLUTIONS
1. Financial smodels sare sused sto: s1. sassess sfinanical shealth sof sthe sfirm s(diagnosis)
2. forecast sthe sfinancial shealth sof shte sfirm s(prognosis)
3. identify schanges sto simprove sthe sfinancial shealth sof sthe sfirm s(treatment)
2. liquidity sratios: smeasure sa scompany's sability sto smeet sits sshort-term sfinancial sobligations
susing sits smost sliquid sassets
3. High sliquidity sratios sindicate: sstrong scapacity sto scover sshort-term sdebts, senhancing
sthe sfirm's scredit- sworthiness sand sfinancial sstability
4. Low s liquidity s ratios s indicate: s a scompany smay shave sa sproblem swith spaying sits sbill
5. activity sratios s- saka sefficiency sratios: sevaluate show seflciently sa sfirm sutilizes sits
sassets sto sgenerate ssales sor srevenue.
provide sinsights sinto sthe soperational sperformance sof sthe scompany, sindicating show swell sit smanages sits
soverall sasset sbase.
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,6. activity sratios s- saka sefficiency sratios: sprovide sinsights sinto sthe soperational
sperformance sof sthe scompany, sindicating show swell sit smanages sits soverall sasset sbase.
7. leverage sratios: smeasure sthe sextent sto swhich sa sfirm suses sdebt sto sfinance sits soperations san
sgrowth
8. leverage sratios: shighlight sthe scompany's sstructure sor smixture sof sdebt sand sequity—which
sis scalled s"capital sstructure"—and sits sreliance son sexternal sfunding
9. higher sleverage sratios smay sindicate: sgreater sfinancial srisk, sas sthe scompany smight
sstruggle sto smeet sits sdebt sobligations sduring seconomic sdownturns
10. moderate sleverage sratio scan: senhance sreturns son sequity swhen smanaged
sproperly
11. profitability sratios: sassess sa scompany's sability sto sgenerate searnings srelative sto sits
srevenue, sassets, sor sequity.
12. profitability s ratios: s provide san sindication sof sthe sfirm's scapacity sto sproduce sprofits
13. higher sprofitability sratios stypically ssuggest: sa swell-managed scompany
swith settective scost scontrol sand sstrong srevenue-generating scapabilities
14. market sratios: sanalyze sa scompany's sfinancial sperformance sin srelation sto sits sstock spric
15. market sratios: sprovide sinsights sinto sinvestor sperceptions sand smarket svaluation sof
sthe sfirm. sThey shelp sin sunderstanding show sthe smarket svalues sthe scompany's searnings, sgrowth
sprospects, sand srisk sprofile
16. Favorable smarket sratios sgenerally sreflect: spositive sinvestor ssentiment
sand sconfidence sin sthe scompany's sfuture sperformance
17. Unfavorable smarket sratios ssometimes sindicate: sa scompany smight sbe
sovervalued sby smarket sparticipants.
18. cross-sectional sanalysis.: sComparing sthe sfinancial sratios sof sone scompany sto sthe
ssame sfinancial sratios sof sanother scompany.
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, 19. time-series s analysis: s Comparing sa sfinancial sratio sacross stime.
20. How sdo syou sconduct scross-sectional sanalysis susing sfinancial
sratios?: sBy scompar- sing sthe sfinancial sratios sof sone scompany sto sthe ssame sfinancial sratios sof
sanother scompany
21. How sdo syou sconduct stime-series sanalysis susing sfinancial
sratios?: sBy scomparing sa sparticular sfinancial sratio sfor sa scompany sacross stime
22. financial sstatements: sdocuments sthat sprovide sa scomprehensive ssnapshot sof sa
scompany's sperformance s and soperational seflciency
23. balance ssheet: spresents sa scompany's sfinancial sposition sat sa
sspecific spoint sin stime. sAssets s= sLiabilities s+ sShareholders' sEquity.
24. assets: s Resources sowned sby sa scompany swith seconomic svalue.
25. current s assets: s cash, sinventories, sreceivables
26. fixed sassets: sproperty, splant sand sequipment
27. liabilities: s Obligations sor sdebts sowed sby sa sbusiness.
28. current sliabilities: sdue swithin sone syear
29. long-term sliabilities: sdue safter sone syear
30. shareholders sequity: sOwner's sclaim son sassets safter
sliabilities sare ssettled. sincludes spaid-in scapital, sretained searnings,
streasury sstock
31. total sassets: ssum sof scurrent sand sfixed sassets
32. total s liabilities: s sum sof scurrent sliabilities sand slong-term sdebt
33. total sequity: sthe sditterence sbetween stotal sassets sand stotal sliabilities
34. What sis sthe sdifference sbetween sassets sand sshareholders'
sequity?: sAssets sare sresources sthat shave seconomic svalue, swhile sshareholders' sequity sis sthe
sowners' sclaim son sthe scompany's sassets safter sall sliabilities shave sbeen ssettled.
35. What sis sthe sdifference sbetween sa scurrent sliability sand slong-
term sdebt?: sCurrent
liabilities sare sthose sthat sare sdue swithin sone syear sof sthe scurrent sdate. sThey sare salso sknown sas
sshort-term sliabilities. sLong-term sdebt sincludes sliabilities sthat sare sdue safter sone syear sof sthe scurrent
sdate. sThey sare salso sknown sas slong-term sliabilities.
36. income sstatement: soutlines sthe scompany's sfinancial sperformance sover sa sspecific
speriod, susually sa smonth,
quarter, sor syear.
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1. Financial smodels sare sused sto: s1. sassess sfinanical shealth sof sthe sfirm s(diagnosis)
2. forecast sthe sfinancial shealth sof shte sfirm s(prognosis)
3. identify schanges sto simprove sthe sfinancial shealth sof sthe sfirm s(treatment)
2. liquidity sratios: smeasure sa scompany's sability sto smeet sits sshort-term sfinancial sobligations
susing sits smost sliquid sassets
3. High sliquidity sratios sindicate: sstrong scapacity sto scover sshort-term sdebts, senhancing
sthe sfirm's scredit- sworthiness sand sfinancial sstability
4. Low s liquidity s ratios s indicate: s a scompany smay shave sa sproblem swith spaying sits sbill
5. activity sratios s- saka sefficiency sratios: sevaluate show seflciently sa sfirm sutilizes sits
sassets sto sgenerate ssales sor srevenue.
provide sinsights sinto sthe soperational sperformance sof sthe scompany, sindicating show swell sit smanages sits
soverall sasset sbase.
1 s/
s19
,6. activity sratios s- saka sefficiency sratios: sprovide sinsights sinto sthe soperational
sperformance sof sthe scompany, sindicating show swell sit smanages sits soverall sasset sbase.
7. leverage sratios: smeasure sthe sextent sto swhich sa sfirm suses sdebt sto sfinance sits soperations san
sgrowth
8. leverage sratios: shighlight sthe scompany's sstructure sor smixture sof sdebt sand sequity—which
sis scalled s"capital sstructure"—and sits sreliance son sexternal sfunding
9. higher sleverage sratios smay sindicate: sgreater sfinancial srisk, sas sthe scompany smight
sstruggle sto smeet sits sdebt sobligations sduring seconomic sdownturns
10. moderate sleverage sratio scan: senhance sreturns son sequity swhen smanaged
sproperly
11. profitability sratios: sassess sa scompany's sability sto sgenerate searnings srelative sto sits
srevenue, sassets, sor sequity.
12. profitability s ratios: s provide san sindication sof sthe sfirm's scapacity sto sproduce sprofits
13. higher sprofitability sratios stypically ssuggest: sa swell-managed scompany
swith settective scost scontrol sand sstrong srevenue-generating scapabilities
14. market sratios: sanalyze sa scompany's sfinancial sperformance sin srelation sto sits sstock spric
15. market sratios: sprovide sinsights sinto sinvestor sperceptions sand smarket svaluation sof
sthe sfirm. sThey shelp sin sunderstanding show sthe smarket svalues sthe scompany's searnings, sgrowth
sprospects, sand srisk sprofile
16. Favorable smarket sratios sgenerally sreflect: spositive sinvestor ssentiment
sand sconfidence sin sthe scompany's sfuture sperformance
17. Unfavorable smarket sratios ssometimes sindicate: sa scompany smight sbe
sovervalued sby smarket sparticipants.
18. cross-sectional sanalysis.: sComparing sthe sfinancial sratios sof sone scompany sto sthe
ssame sfinancial sratios sof sanother scompany.
2 s/
s19
, 19. time-series s analysis: s Comparing sa sfinancial sratio sacross stime.
20. How sdo syou sconduct scross-sectional sanalysis susing sfinancial
sratios?: sBy scompar- sing sthe sfinancial sratios sof sone scompany sto sthe ssame sfinancial sratios sof
sanother scompany
21. How sdo syou sconduct stime-series sanalysis susing sfinancial
sratios?: sBy scomparing sa sparticular sfinancial sratio sfor sa scompany sacross stime
22. financial sstatements: sdocuments sthat sprovide sa scomprehensive ssnapshot sof sa
scompany's sperformance s and soperational seflciency
23. balance ssheet: spresents sa scompany's sfinancial sposition sat sa
sspecific spoint sin stime. sAssets s= sLiabilities s+ sShareholders' sEquity.
24. assets: s Resources sowned sby sa scompany swith seconomic svalue.
25. current s assets: s cash, sinventories, sreceivables
26. fixed sassets: sproperty, splant sand sequipment
27. liabilities: s Obligations sor sdebts sowed sby sa sbusiness.
28. current sliabilities: sdue swithin sone syear
29. long-term sliabilities: sdue safter sone syear
30. shareholders sequity: sOwner's sclaim son sassets safter
sliabilities sare ssettled. sincludes spaid-in scapital, sretained searnings,
streasury sstock
31. total sassets: ssum sof scurrent sand sfixed sassets
32. total s liabilities: s sum sof scurrent sliabilities sand slong-term sdebt
33. total sequity: sthe sditterence sbetween stotal sassets sand stotal sliabilities
34. What sis sthe sdifference sbetween sassets sand sshareholders'
sequity?: sAssets sare sresources sthat shave seconomic svalue, swhile sshareholders' sequity sis sthe
sowners' sclaim son sthe scompany's sassets safter sall sliabilities shave sbeen ssettled.
35. What sis sthe sdifference sbetween sa scurrent sliability sand slong-
term sdebt?: sCurrent
liabilities sare sthose sthat sare sdue swithin sone syear sof sthe scurrent sdate. sThey sare salso sknown sas
sshort-term sliabilities. sLong-term sdebt sincludes sliabilities sthat sare sdue safter sone syear sof sthe scurrent
sdate. sThey sare salso sknown sas slong-term sliabilities.
36. income sstatement: soutlines sthe scompany's sfinancial sperformance sover sa sspecific
speriod, susually sa smonth,
quarter, sor syear.
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s19
