FSA Final Exam
footnotes to financial stamentments most likely
provide additional information
transparency is best described as
providing information to owners and other stakeholders in an understandable manner
restatements are most often affecting
revenues
which of the following statements is incorrect
there is one formula used in calculating free cash flow accoring to GAAP
the larger the standard deviation of an assets return, the greater is the assets
total risk
the risk that can be diversified away is best described as
unsystematic risk
a comany that has cash flow from operations of 100 mil, free cash flow of 120, and net borrowings of 20 mil has capital expeditures closest to
0
which of the following will most likely have a higher yield at a point in time?
10 year BBB rated corporate bond
suppose the rist free rate of insterst is 4% and the market risk premium is 5%. a company with a stock beta of 1.2 has a cost of equity closest to
10%
if a comapany has cas flow from operations of 10 mil, capital expenditures of 2 mil, and net borrowings of 3 mil, its free cash from to equity is closest to
11 mil
a company with a marginal tax rate of 35% and a yield on any new debt issuance of 8% has an after-tax cost of debt closest to
2.8%
suppose a company currently pas $1 in dividends, and dividends are expected to grow at a rate of 5% per year for two years and then grow at a rate of 3% per year, ad infinitum. If investors require an 8% return on their investment, the value of a share is closest to
21.20
for a company with dividends that are expected to grow at a rate of 4% per year, a current dividend that is $1.50 per share, and investors who require a 9% roi, the value of a share of stock is closest to
31.20
if a company's net income is 30 mil, its depreciation is 10 mil, its interst expense is 5 mil, and its tax rate is 30%, the ompanys EBDA and EBITDA, respectively, are closest to
40 mil and 62 mil
A company with a price-earnings ratio of 14 has an earnings yield closest to
7.14%
pro forma financial statements are best described as
a company's own preference for reporting
based on the relationship in the dividend valuation model, an increase in the dividend payout ratio most likely results in
a higher price-earnings ratio
spread duration is best described as
a measure of how a bond's price will likely change if the credit spread changes in the market
Qualified Opinion
a report issued when the auditor believes that the overall financial statements are fairly stated but that either the scope of the audit was limited or the financial data indicated a failure to follow GAAP
an issuers ability to secure liquid fund may be represented by all but which of the following
an altman z-score above 1.81
based on the porters five forces, a beer company that has a single supplier of hops, but distributes its products among retail clients has a threat based on
bargaining power of suppliers
economic profit is best described as the difference between revenues and costs, where costs include
both direct expenses and the cost of capital
the ability of the issuer to oay its obligations is best described as
capacity
which of the following is not considered one of the four Cs
capital
a financially healthy company will most likely have
cash flow from operations
cashflow from operations may differ from net income because of
changes in working capital
a low altman z-score is most indicative of a
company likely to enter bankruptcy
the CFAR ratio is best decribed as a comparison of three cash flow and
deft oblohation
migration risk is best described as the risk of the
downgrading of debt obligations credit rating
Pro forma earnings are best described as
earnings determined usung accounting principles other than GAAP
a clawback in the context of financial restatements refers to
executive compensation
mark-to-market accounting
exposed the value of the holding of the financial firms
net fre chas flow is best described as free cash flow after
financing costs nd taxes
an adverse opinion regarding a material weakness in internal controls is
generally viewed as a warning of financial or governance issues
an effective portfolio, according to Markowitz, is all but which of the following
greater risk fora given level of expected return
according to the CAPM, the higher the beta, the
higher the stocks expected return
which of the following has not been observed for the fama-french three-factor model
in general, firms with high book-market ratios have higher returns than firms with lower book-to-market ratios
which of the following statements is incorrect
in practice, the calculation of economic profit is determined based on GAAP
an increase cash flow to equal capital expenditures ratio is consistent with
increasing financial flexabilty
an increae in cash flow to capital expenditures ratio is consistent with
increasing finncial flexability
accourding to the molodovsky effect, in recessionary enviorments, the price-earnings ratios of cyclical companies are most likely
overstated
cash flow information
is most likely more reliable than earnings
Dilutive earnings per share will always be
less than or equal to basic earnings per share
which of the following uses factors drawn from a firms financial statements and market information
macroeconomic factor model
a stocks beta is the measure of the stocks
market risk
market value added is best described as the
market value of the firm, less invested capital
regarding growth rates in revenues and earnings, a high growth rate
may not be sustainable
key elements of a good performance measure includes all but which of the following
measure should focus on actual results instead of expected or predicted results
free cash flow to equity is cash from operations, less capital expenitiures, plus
net barrowings
the arbitrage pricing theory is a model in which
several factors may explain a stocks expected return
a cash waterfall is best described as a breakdown of free cash flows by
source
when calculating net operating profit after taxes, depreciation is
subtracted from operating income
during a recessionary economic environment, credit spreads
tend to increase
possible explanations for the role of the book value to market value in explaining stock returns include all but which of the following
the book value to market value ratio is proxy for financial statements
which of the following is not one of porters 5 forces
the borrowing power of regulators
which of the following is most likely considered a negative covenant
the company is not permitted to pay dividends until all interest obligations on debt are satisfied
which fo the following statements is not true
the fundamental beta allows for the potential of beta to change over time
which of the following best describes the MSCI fundamental factor model
the model includes only unsystematic factors
which of the following best describes default risk
the risk that the borrower will not satisfy the terms of the debt obligation
a stock of a compan that has a high book-market ratio is mot likely referred to as a
value stock
a cyclical company with a constant dividend growth rate stratgey most likely will have
variable dividend payouts