FINC 3610 LATEST 2026 EXAM QUESTIONS AND
ANSWERS MARKED A+
✔✔market value - ✔✔the price today at which you could sell an asset
✔✔income =.... - ✔✔revenue - expenses
✔✔CF from assets = ..... - ✔✔CF to creditors + CF to stockholders
✔✔3 major categories of cash flows - ✔✔operating
investment
financing
✔✔operating cf - ✔✔directly related to sales and cash flow production
✔✔Cash flow from assets = ? (longer one) - ✔✔Operating cash flow - Net capital
spending- Change in net working capital
✔✔Net capital spending = - ✔✔Ending net fixed assets - Beginning net fixed assets +
depreciation
✔✔Change in net working capital = - ✔✔Ending net working capital - Beginning net
working capital
✔✔average tax rate - ✔✔simply the firm's tax bill divided by its taxable income
✔✔marginal tax rate - ✔✔the tax rate on the next $1 earned
✔✔shareholders equity = - ✔✔assets - liabilities
✔✔how companies generate cash - ✔✔by selling either a product, service, asset, or
security (raising equity or debt).
✔✔how companies spend cash - ✔✔by purchasing labor, materials, or assets and by
paying cash to suppliers or owners
✔✔balance sheet is standardized by.... - ✔✔total assets
✔✔income statement is standardized by.... - ✔✔total sales
✔✔cross sectional analysis - ✔✔compare one firm to another firm or a group of firms at
a single point in time
✔✔time series analysis - ✔✔compare changes in financials in a single firm
, ✔✔shareholders - ✔✔buy and sell decisions in the market
✔✔creditors - ✔✔examine the long-term viability and short-term bankruptcy risk of the
firm
✔✔managers - ✔✔make decisions that maximize shareholder value
✔✔current ratio= - ✔✔CA/CL
✔✔quick ratio= - ✔✔(Current Assets - Inventory) / Current Liabilities
✔✔cash ratio= - ✔✔Cash / Current Liabilities
✔✔NWC to TA= - ✔✔NWC/TA
✔✔NWC= - ✔✔current assets - current liabilities
✔✔interval measure= - ✔✔Current Assets/Average Daily Operating Costs
✔✔total debt ratio= - ✔✔(Total Assets - Total Equity) / Total Assets
✔✔debt-equity ratio= - ✔✔Total Debt/Total Equity
✔✔equity multiplier= - ✔✔Total Assets/Total Equity
✔✔LT debt ratio= - ✔✔LT debt / (LT debt + equity)
✔✔times interest earned ratio= - ✔✔EBIT/Interest
✔✔cash coverage ratio= - ✔✔(EBIT + Depreciation) / Interest
✔✔inventory turnover= - ✔✔COGS/ Inventory
✔✔days sales in inventory= - ✔✔365 days / inventory turnover
✔✔receivables turnover= - ✔✔Sales / Accounts Receivable
✔✔days sales in receivables= - ✔✔365/receivables turnover
✔✔TA turnover= - ✔✔Sales/Total Assets
✔✔FA turnover= - ✔✔sales/net fixed assets
ANSWERS MARKED A+
✔✔market value - ✔✔the price today at which you could sell an asset
✔✔income =.... - ✔✔revenue - expenses
✔✔CF from assets = ..... - ✔✔CF to creditors + CF to stockholders
✔✔3 major categories of cash flows - ✔✔operating
investment
financing
✔✔operating cf - ✔✔directly related to sales and cash flow production
✔✔Cash flow from assets = ? (longer one) - ✔✔Operating cash flow - Net capital
spending- Change in net working capital
✔✔Net capital spending = - ✔✔Ending net fixed assets - Beginning net fixed assets +
depreciation
✔✔Change in net working capital = - ✔✔Ending net working capital - Beginning net
working capital
✔✔average tax rate - ✔✔simply the firm's tax bill divided by its taxable income
✔✔marginal tax rate - ✔✔the tax rate on the next $1 earned
✔✔shareholders equity = - ✔✔assets - liabilities
✔✔how companies generate cash - ✔✔by selling either a product, service, asset, or
security (raising equity or debt).
✔✔how companies spend cash - ✔✔by purchasing labor, materials, or assets and by
paying cash to suppliers or owners
✔✔balance sheet is standardized by.... - ✔✔total assets
✔✔income statement is standardized by.... - ✔✔total sales
✔✔cross sectional analysis - ✔✔compare one firm to another firm or a group of firms at
a single point in time
✔✔time series analysis - ✔✔compare changes in financials in a single firm
, ✔✔shareholders - ✔✔buy and sell decisions in the market
✔✔creditors - ✔✔examine the long-term viability and short-term bankruptcy risk of the
firm
✔✔managers - ✔✔make decisions that maximize shareholder value
✔✔current ratio= - ✔✔CA/CL
✔✔quick ratio= - ✔✔(Current Assets - Inventory) / Current Liabilities
✔✔cash ratio= - ✔✔Cash / Current Liabilities
✔✔NWC to TA= - ✔✔NWC/TA
✔✔NWC= - ✔✔current assets - current liabilities
✔✔interval measure= - ✔✔Current Assets/Average Daily Operating Costs
✔✔total debt ratio= - ✔✔(Total Assets - Total Equity) / Total Assets
✔✔debt-equity ratio= - ✔✔Total Debt/Total Equity
✔✔equity multiplier= - ✔✔Total Assets/Total Equity
✔✔LT debt ratio= - ✔✔LT debt / (LT debt + equity)
✔✔times interest earned ratio= - ✔✔EBIT/Interest
✔✔cash coverage ratio= - ✔✔(EBIT + Depreciation) / Interest
✔✔inventory turnover= - ✔✔COGS/ Inventory
✔✔days sales in inventory= - ✔✔365 days / inventory turnover
✔✔receivables turnover= - ✔✔Sales / Accounts Receivable
✔✔days sales in receivables= - ✔✔365/receivables turnover
✔✔TA turnover= - ✔✔Sales/Total Assets
✔✔FA turnover= - ✔✔sales/net fixed assets
