Section A: Financial Statement Analysis

Question 1

Degree of Operating Leverage

Answer 1

CM / EBIT
Or
(Sales - VC) / Profit

Question 2

What are some operating efficiency ratios?

Answer 2

AP, AR, and inventory turnover
Days’ Sales in inventory and AR
Days’ Purchases in AP

Question 3

Inventory Turnover Ratio

Answer 3

COGS / Avg Inventory

Question 4

Days’ Sales in Inventory

Answer 4

365 / Inventory TO

Question 5

AR Turnover

Answer 5

Credit Sales / Avg Gross AR

Question 6

Days’ Sales in Receivables

Answer 6

365 / AR TO

Question 7

AP Turnover

Answer 7

Credit Purchases / Avg AP

Question 8

Days Purchases in AP

Answer 8

365 / AP TO

Question 9

Operating cycle is calculated by

Answer 9

Days Sales in AR + Days Sales in Inventory

Question 10

Cash/Conversion cycle is calculated by

Answer 10

Days Sales in AR + Days Sales in inventory - Days purchases in AP

Question 11

Intracompany analysis

Answer 11

When information from one firm is compared over time. Trend analysis

Question 12

Intercompany analysis

Answer 12

When two companies in the same industry are compared

Question 13

CAPM equation

Answer 13

Question 14

Functional currency

Answer 14

Currency used in its primary economic environment

Question 15

Degree of financial leverage

Answer 15

EBIT / EBT

Question 16

Discounted Payback Period

Answer 16

Amount of time it takes for the sums of the discounted cash flows to equal initial project investment

Question 17

Book value of a company is

Answer 17

Difference of BV of assets - BV of Liab + Pref Equity