Module 2

Question 1

Assets that related to activities that the firm conducts in order to execute its value proposition

Answer 1

operating assets

Question 2

assets that the company could liquidate and then distribute the proceeds without affecting its value prop

Answer 2

financial assets

Question 3

buffer cash held by the firm to mitigate the effects of shocks, such as temporary decline in revenue, payment disruptions or key customers

Answer 3

operating cash

Question 4

cash that could be distributed without effecting operations

Answer 4

excess cash

Question 5

How do you calculate operating cash?

Answer 5

lesser of 2% of total revenue or total cash and cash equivalents

Question 6

Why would company A pay more than the FMV for company B?

Answer 6

Synergies

Question 7

What does goodwill represent?

Answer 7

expected synergies that company A is willing to pay a premium on in order to get more revenue or cost saving

Question 8

ROIC equation

Answer 8

Income on Invested Capital/Avg Invested Cap

Question 9

accy ratio that compares the income investors earned on the invested capital to the amount they invested in the company

Answer 9

ROIC

Question 10

present value of the expected future cash flows discounted at the waited avg cost of capital

Answer 10

value

Question 11

Does how you fund a firm effect value?

Answer 11

No, less important but not not important

Question 12

How is the value of a company effected?

Answer 12

by how it is operated

Question 13

What is the most common KPI that tells us about value creation?

Answer 13

ROIC

Question 14

obligations that arise as a result of pursuing the companies value proposition

Answer 14

Operation liabilities

Question 15

obligations incurred to fund the operations

Answer 15

financial obligations

Question 16

represents the size of the claim that investors have on the operations

Answer 16

Invested capital

Question 17

Invested capital equation

Answer 17

Total stock holders equity + financial obligations - financial assets

Question 18

equals the difference between operating assets and operating liabilities

Answer 18

net operating assets (NOA)

Question 19

Net operation assets (NOA) and ____ are opposite sides of the same coin.

Answer 19

invested capital (IC)

Question 20

When we evaluate a company’s ____, we learn about it’s ____.

Answer 20

net operating assets, invested capital

Question 21

Net operating profit after tax formula (NOPAT)

Answer 21

Operating revenue - operating expenses - taxes on operating activities

Question 22

What formula equals NOPAT

Answer 22

Income on invested capital (IIC)

Question 23

As part of NOPAT, you have to calculate taxes on operating activities. How do you do that?

Answer 23

Net financial expense (Interest revenue and expenses) X Tax Rate = Tax Savings from net financial expenses. Then add the tax savings to total “tax expense”

Question 24

Net operating assets (NOA) formula

Answer 24

Total operating assets - total operating liabilities

Question 25

What formula equals NOA?

Answer 25

Invested capital

Question 26

Invested capital equation

Answer 26

net financial expense before tax
less: taxes on financing activities
Net financial expense after tax

Question 27

The more ___ you have the more ___ you should generate

Answer 27

capital, revenue

Question 28

We want to think about evaluating a business from the perspective of its _______.

Answer 28

value creating potential