WALL STREET PREP PREMIUM EXAM (A+)
QUESTIONS WITH CORRECT ANSWERS GRADED TO
PASS
1. What is generally not considered to be a pre-tax non-recurring (unusual or
infrequent) item?
Answer: Extraordinary gains/losses
2. What is false about depreciation and amortization?
Answer: D&A may be classified within interest expense
3. Company X's current assets increased by $40 million from 2007-2008 while the
company's current liabilities increased by $25 million over the same period. What
was the cash impact of the change in working capital?
Answer: A decrease of $15 million
4. The final component of an earnings projection model is calculating interest
expense. Why may this create a circular reference?
Answer: Interest expense affects net income, which affects FCF, which affects the
amount of debt a company pays down, which, in turn, affects the interest expense
— hence the circular reference.
5. A 10-Q financial filing has all of the following characteristics except:
Answer: Issued four times a year.
6. Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to:
Answer: Computers used by the accounting department
7. If a company has projected revenues of $10 billion, a gross profit margin of
65%, and projected SG&A expenses of $2 billion, what is the company's operating
(EBIT) margin?
Answer: 45%
8. A company has the following information: 2014 revenues of $5 billion, 2013
accounts receivable of $400 million, 2014 accounts receivable of $600 million.
What are the days sales outstanding (DSO)?
Answer: 36.5
9. A company has the following information:
2014 Revenues: $8 billion
, 2014 COGS: $5 billion
2013 Accounts receivable: $400 million
2014 Accounts receivable: $600 million
2013 Inventories: $1 billion
2014 Inventories: $800 million
2013 Accounts payable: $250 million
2014 Accounts payable: $300 million
What are the inventory days for the company?
Answer: 65.7 days
10. Which of the following is true?
Answer: Coca-Cola's brand name is not reflected as an intangible asset on its
balance sheet.
11. A company has the following:
2014 share repurchase plan of $4 billion
Average share price of $60 for 2013
Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your
financial model?
Answer: 60.6 million
12. Non-controlling interest:
Answer: Is an expense on the income statement and equity on the balance sheet
13. A company has:
2013 retained earnings: $12 billion
2014 net income: $3.5 billion
2014 CapEx: $200 million
2014 preferred dividends: $100 million
2014 common dividends: $400 million
What is the retained earnings balance at the end of 2014?
Answer: $15 billion
QUESTIONS WITH CORRECT ANSWERS GRADED TO
PASS
1. What is generally not considered to be a pre-tax non-recurring (unusual or
infrequent) item?
Answer: Extraordinary gains/losses
2. What is false about depreciation and amortization?
Answer: D&A may be classified within interest expense
3. Company X's current assets increased by $40 million from 2007-2008 while the
company's current liabilities increased by $25 million over the same period. What
was the cash impact of the change in working capital?
Answer: A decrease of $15 million
4. The final component of an earnings projection model is calculating interest
expense. Why may this create a circular reference?
Answer: Interest expense affects net income, which affects FCF, which affects the
amount of debt a company pays down, which, in turn, affects the interest expense
— hence the circular reference.
5. A 10-Q financial filing has all of the following characteristics except:
Answer: Issued four times a year.
6. Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to:
Answer: Computers used by the accounting department
7. If a company has projected revenues of $10 billion, a gross profit margin of
65%, and projected SG&A expenses of $2 billion, what is the company's operating
(EBIT) margin?
Answer: 45%
8. A company has the following information: 2014 revenues of $5 billion, 2013
accounts receivable of $400 million, 2014 accounts receivable of $600 million.
What are the days sales outstanding (DSO)?
Answer: 36.5
9. A company has the following information:
2014 Revenues: $8 billion
, 2014 COGS: $5 billion
2013 Accounts receivable: $400 million
2014 Accounts receivable: $600 million
2013 Inventories: $1 billion
2014 Inventories: $800 million
2013 Accounts payable: $250 million
2014 Accounts payable: $300 million
What are the inventory days for the company?
Answer: 65.7 days
10. Which of the following is true?
Answer: Coca-Cola's brand name is not reflected as an intangible asset on its
balance sheet.
11. A company has the following:
2014 share repurchase plan of $4 billion
Average share price of $60 for 2013
Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your
financial model?
Answer: 60.6 million
12. Non-controlling interest:
Answer: Is an expense on the income statement and equity on the balance sheet
13. A company has:
2013 retained earnings: $12 billion
2014 net income: $3.5 billion
2014 CapEx: $200 million
2014 preferred dividends: $100 million
2014 common dividends: $400 million
What is the retained earnings balance at the end of 2014?
Answer: $15 billion
