FINA 470 Final
Company X has a Fixed Asset Turnover ratio of 4.7x. Company Y has a fixed Asset Turnover ratio of 3.2x. Both companies are in the same industry. Which company makes the most efficient use of its fixed assets? a. Company X b. Company Y
a - Company X
In which of the following SEC reporting forms are you most likely to find details on the compensation of officers and directors? a. DEF 14A b. 13-G c. 8-K d. 10-K
a - DEF 14A
The DuPont formula was developed by an analyst at which of the following companies? a. DuPont b. Kodak c. Eastman Chemical
a - DuPont
Which of the following measures the cash flow available for both debt and equity? a. FCFF b. FCFE
a - FCFF
Value Investing is a concept popularized following the Great Depression by a. Graham and Dodd b. Franklin Roosevelt c. Jay Gould
a - Graham and Dodd
SPG is a US REIT which specializes in Shopping Centers globally. It is a US GAAP reporter and listed on the NYSE. In 2020, it has taken a fixed asset impairment charge on the value of its shopping center assets due to the decline in incentive rents being paid by its retail tenants. SPG expects a recovery in the incentive rents as the retain environment improves. If and when that occurs, what are SPG's options to reverse the impairment charges? a. It has no options, the impairment charges cannot be reversed b. It can reverse the impairment charges once the value of the shopping centers recovers c. It can only reverse the impairment charge on the assets which are located outside the U.S.
a - It has no options, the impairment charges cannot be reversed
In counting Ballots in the recent Presidential Election, which method was most commonly used in the US? a. LIFO b. FIFO
a - LIFO b - FIFO
Spectre Bankcorp has a large business segment creating mortgage backed securities and other CLOs. It uses Mark to Market Accounting for its inventory of securities and it's trading book. It classifies its mark to market portfolio according to three levels specified by US GAAP. As an investor in the bank, to which level of classification will you pay the greatest attention as they have the greatest risk of valuation error.? a. Level 3 b. Level 2 c. Level 1
a - Level 3
When Bankers use the term "Capacity" it refers to which of the following? a. The ability of a company to generate sufficient cash flow to meet its obligation b. A capital structure where the lender has sufficient collateral in a company's assets c. A demonstrated willingness on the part of the borrower to pay its debts
a - The ability of a company to generate sufficient cash flow to meet its obligation
Which of the following is true: a. The greater the swap rate the greater the risk. b. The lower the swap rate, the greater the risk.
a - The greater the swap rate the greater the risk
Which Price/Earnings ratio uses the earnings of the last 12 months? a. Trailing P/E b. Current P/E c. Forward P/E d. Normalized P/E
a - Trailing P/E
A company uses the LIFO valuation method. It is reporting under: a. US GAAP b. IFRS c. Either IFRS or US GAAP
a - US GAAP
A company's financial position would be best evaluated using the: a. balance sheet b. income statement c. statement of cashflows
a - balance sheet
The financial statement that presents a shareholders residual claim on assets is the: a. balance sheet b. income statement c. cash flow statement
a - balance sheet
The value of an asset is a function of: a. the price agreed between a buyer and seller b. The present value of the cash flows it generates c. The cost of the original investment plus cash distributions
b - The present value of the cash flows it generates
Company A has a Current Ratio of 2.3x. Company B has a current ration of 0.95 x. On the basis of this single ratio, which company has the greater liquidity. a. Company A b. Company B
a - Company A
A company has a raw β of 1.44. What is its adjusted β.
1.3
Company T has announced a 4 to 1 stock split. Prior to the split, its basic earnings per share was $6.00 per share. Its fully diluted earnings per share was $5.80. What is its pro forma basic earnings per share after the split is effective. No $, Round to the nearest cent, include a decimal point.
1.5
What is the bottom up beta for this company? Industry unlevered raw β = 1.2 /Tax rate = 21% / Debt-Equity Ratio = 35%
1.54
Using the following income statement, what was the company's return on average assets in FY2019? Show to only 1 decimal point, no $ or % sign or comma. Round up.
12.1
Your company has Shareholders Equity of $20,400,000. It has Intangible Assets of $3,300,000, Goodwill of 4,100,000, Fixed Assets of $8,000,000. What is the company's Tangible Net Worth? Express in millions. No dollar signs, no commas, no zeros, etc.
13.0
CPB is a mature company with a constant growth rate of 2%. Real GDP growth is expected to average 3% into the future. CPB has a WACC of 8%. The company's net income this year is $650 million. Its Free Cash Flow is $850 million. Using the Gordon Growth Model, what is its value? Express your answer in millions, no $ or commas, round up to the nearest million.
14167
Using the following information, what is the nominal yeild to an investor if they purchase the 30 year Treasury at par. 30 Year US Treasury Coupon: 1.48% Inflation: 1.30% Q to Q GDP Growth Rate: 0.25% Express your answer in basis points.
148
Starting from Net Income and Working up, what is the company's unadjusted EBITDA in 2019. Show to only 1 decimal point, no $ or % sign or comma. Round up.
1482.6
Starting from Net Income and working up, what is the company's Adjusted EBITDA in 2018. Show to only 1 decimal point, no $ or % sign or comma. Round up.
1590.3
Using the following income statement, what was the company's gross margin in FY2019? Show to only 1 decimal point, no $ or % sign or comma. Round up.
19.8
What is the current marginal Federal tax rate in the United States? Express as a percentage to 1 decimal place. No % sign.
21
Using the following information, what is the real yield to an investor if they purchase your 10 year, BB rated bond? 10 Year US Treasury Yield: 3.47% Inflation: 1.39% BB Spread: 2.69% Express your answer in basis points.
217
What is the company's effective tax rate in 2018? Show to only 1 decimal point, no $ or % sign or comma. Round up.
23.0
The following are facts about TESLA: Cash and Equivalents: $8,615 Share Price - $425.92 Shares Outstanding (mm) - 931.81 Shares Sold Short (mm) - 59.0 Total Debt - $15,477 Float - 79.7% What is the Market Capitalization of TESLA? Answers- No $ or % sign. No commas. Round up dollars - no decimals. Percentages to 1 decimal place.
396877
The following are facts about TESLA: Cash and Equivalents: $8,615 Share Price - $425.92 Shares Outstanding (mm) - 931.81 Shares Sold Short (mm) - 59.0 Total Debt - $15,477 Float - 79.7% What is the Total Enterprise Value of TESLA? Answers- No $ or % sign. No commas. Round up dollars - no decimals. Percentages to 1 decimal place.
403739
CPB's DIO is 55 days in a 365 day year. If its sales are $1,000 and its gross margin is 45%, what is its Inventory Turnover Ratio? Round up to 2 decimal places.
6.64
In the third year of your company's projected performance, Sales are estimated to reach $5,000. Last year's sales were $4.6 million. In both years Its gross margin is 40% and it Accounts Receivable Turnover Ratio is 8.0x. What are the forecasted Accounts Receivable at the end of year 3. (Use a whole number, no decimals, no commas, round up)
625.0
Your company acquires a new manufacturing equipment line for $10 million. The economic life in 10 years and the Salvage Value is $1 million at the end of 10 year period. If you elect to use Straight Line Depreciation, what is your basis in the property at the end of year 3 excluding the salvage value. (No decimals, commas, $ signs, etc.)
6300.0
Using the following information, what is the company's WACC. Shareholders Equity on Balance Sheet= $2,563 / Market Capitalization=14,506 /Total Debt=$6,447/ Cost of Equity=8.5% /After-tax Cost of Debt=3.8%.Express as a percentage to 2 decimal points.
7.07
The following are facts about TESLA: Cash and Equivalents: $8,615 Share Price - $425.92 Shares Outstanding (mm) - 931.81 Shares Sold Short (mm) - 59.0 Total Debt - $15,477 Float - 79.7% What is the "Short Interest" in TESLA stock? Answers- No $ or % sign. No commas. Round up dollars - no decimals. Percentages to 1 decimal place.
7.9
Calculate the cost of equity for this company where, the company raw β is 1.00, the ERP is 5.75%, the risk free rate is 3%, the tax rate is 21% and the debt to equity ratio is .55. Express as a percentage to two decimal places.
8.75
Your company's normalized fixed asset turnover ratio is 0.74. You are forecasting future revenues in year 3 of $1,210,000. What is your forecast of your company's fixed assets in year 3. Answer in thousands, no dollar sign, no comma, no decimals)
895400.0
Your company acquires a new manufacturing equipment line for $10 million. The economic life in 10 years and the Salvage Value is $1 million at the end of 10 year period. If you elect to use Straight Line Depreciation, what is the depreciation amount you will recognize in year 3. (No decimals, commas, $ signs, etc.)
900.0
The contractor building my new house has incurred costs equal to 40% of the expected $300,000 cost of his contract with me. He has billed me 50% of the contract price of $400,000. How much does my contractor recognize as revenues this year? a. $160,000 b. $120,000 c. $200,000
a - $160,000
On which statement would you find "Accumulated Depreciation?" a. Balance Sheet b. Income Statement c. Cash Flow Statement d. Statement of Shareholders' Equity
a - Balance Sheet
A company's CFO is found on which financial statement? a. Cash Flow Statement b. Balance Sheet c. Income Statement d. Statement of Shareholders' Equity
a - Cash Flow Statement
What is the initial margin requirement for a short sale in the US? a. 50% b. 150% c. 200% d. There is no margin required
b - 150%
A debt security which allows a borrower to avoid paying interest from cash flow by increasing the principal due on the loan by the interest amount is called a. A "Roll-Up" Debenture b. A "PIK-Toggle" c. A "Zombie Special"
b - A "PIK-Toggle"
A rule of thumb value for interpreting a ratio is often called? a. A "SWAG" b. A Heuristic c. A guide value
b - A Heuristic
Your Company's Income Statement has a category titled "Net Earnings (Loss) Attributable to Non-Controlling Interests." This category indicates which of the following? a. Your company has an ownership interest in another company of less than 50% b. Another company owns an interest in a consolidated subsidiary of your company. c. Your company owns a less than 20% interest in another company
b - Another company owns an interest in a consolidated subsidiary of your company.
A "carry trade" transaction involves which of the following? a. Borrowing against a portfolio of existing investments to fund new investments b. Borrowing in a currency in order to invest in a security denominated in another currency c. Investing in a security which generates sufficient income to carry borrowings on a portfolio
b - Borrowing in a currency in order to invest in a security denominated in another currency
You are entering into a CDS to protect you from a default on a loan you have made to AMC theaters. The company that provides the protection is your: a. Opposite b. Counter-party c. Reference Party
b - Counter-party
Using the following income statement, did the company's net margin improve or deteriorate between 2018 and 2019? Show to only 1 decimal point, no $ or % sign or comma. Round up. a. Improve b. Deteriorate
b - Deteriorate
You are evaluating an acquisition for your company. Which of the following ratios are you most likely to use? a. Debt to EBITDA b. EV to Adjusted EBITDA Shareholders Equity to EBITDA
b - EV to Adjusted EBITDA
Which of the following elements of financial statements is most closely related to measurement of performance? a. Assets b. Expenses c. Liabilities
b - Expenses
Items on a US GAAP Balance Sheet are listed in which order. a. Alphabetically b. From most liquid to least liquid c. From least liquid to most liquid d. The order is at the discretion of the reporting company
b - From most liquid to least liquid
Your company acquires a new manufacturing equipment line for $10 million. The economic life is 10 years and the Salvage Value is $1 million at the end of 10 year period. You have elected Straight Line Depreciation. If you elected the Double Declining Balance depreciation instead of Straight Line, your depreciation in year one would be: a. The same as the Straight Line Depreciation b. Greater than the Straight Line Depreciaition c. Less than the Straight Line Depreciation
b - Greater than the Straight Line Depreciation
A majority of companies using GAAP calculate Cash Flow from Operations using the: a. Direct Method b. Indirect Method c. Rhythm Method
b - Indirect Method
Which inventory method is least likely to be used under IFRS? a. First in, first out (FIFO) b. Last in, first out (LIFO) c. Weighted average
b - Last in, first out (LIFO)
Which of the following is not a "value event?" A change in: a. Risk b. Momentum c. Growth
b - Momentum
Which standardized value did your professor warn you against using in your Relative Valuation? a. EV/EBITDA b. Price/Book c. Price/Earnings d. EV/FCFF
b - Price/Book
Price seeking for equity securities uses what methodology? a. Intrinsic Analysis b. Relative Value c. Technical Analysis
b - Relative Value
One of Enron's techniques to inflate its revenues was to engage in fraudulent trades with other energy trading companies. What were these types of trades called? a. Wash trades b. Round-trip trades c. Pull Forward trades
b - Round-trip trades
US generally accepted accounting principles are currently developed by which entity? a. The Securities and Exchange Commission b. The Financial Accounting Standards Board c. The Public Company Accounting Oversight Board
b - The Financial Accounting Standards Board
International financial reporting standards are currently developed by which entity? a. the IFRS foundation b. The International Accounting Standards Board c. The International Organization of Securities Commissions
b - The International Accounting Standards Board
A company reports a large Deferred Tax Liability. Which of the following statements is true? a. The company has paid more taxes than it has reported on the GAAP Financial Statements b. The company has paid less than it has reported on it GAAP Financial Statements c. The effective tax rate for companies has recently decreased d. The effective tax rate for companies has recently increased
b - The company has paid less than it has reported on it GAAP Financial Statements
The fiscal year-end Balance Sheet is valuable to an analyst as it shows: a. The change in the financial condition of a company over the 12 month period b. The financial condition of a company on the date the fiscal year ends c. The amount of cash the company generated over the 12 month period d. All of the above
b - The financial condition of a company on the date the fiscal year ends
Historically, what has been the purpose of a stock split? a. To facilitate "odd-lot" trading in a company's shares b. To facilitate "round-lot" trading in a company's shares c. To reduce excess liquidity in a company's stock
b - To facilitate "round-lot" trading in a company's shares
A company's "Capital" is calculated as: a. Total Liabilities plus Shareholders' Equity b. Total Debt plus Shareholders' Equity c. Total Assets minus Shareholders' Equity d. Total Assets minus Total Debt
b - Total Debt plus Shareholders' Equity
The assumption that the effects of transactions and other events are recognized when they occur, not when the cash flows occur, is called: a. relevance b. accrual basis c. going concern
b - accrual basis
A key element of the Wirecard scandal was Ernest & Young's failure to exercise their responsibilities in preparing the company's financial statements. a. true b. false
b - false
One can complete a valuation analysis of a company by focusing exclusively on its historic cash flows? a. true b. false
b - false
The use of non-GAAP/IFRS measures by companies when reporting financial results is highly regulated to avoid them being misused to distort performance. There are very few examples of questionable non-GAAP?IFRS adjustments. Most companies only report GAPP/IFRS results. a. true b. false
b - false
A company's profitability for a period would best be evaluated using the: a. balance sheet b. income statement c. statement of cash flows
b - income statement
When we prepare the forecast for our companies, we will use the Gordon Growth Model to find a present value for the cash flows from year 11 to "infinity." To determine the factor g in the model, we will use the growth rate of projected output for the US Economy as a whole. This is called the: a. real GDP growth rate. b. nominal GDP growth rate. c. consumer price rate of increase d. GDP price deflator
b - nominal GDP growth rate
Denali Limited, a manufacturing company, had the following income statement information: Revenue $4,000,000 Cost of goods sold $3,000,000 Other operating expenses $500,000 Interest expense $100,000 Tax expense $120,000 Denali's gross profit is equal to a. $280,000. b. $500,000. c, $1,000,000.
c - $1,000,000
A company's DSO is 35 days; Its DIO is 90 days and it's DPO is 105. What is its Cash Conversion Cycle? a. 230 days b. 140 days c. 20 days d. -20 days
c - 20 days
Which the following models generates a value which predicts bankruptcy risk? a. Pitrosky F-Score b. Beneish M-Score c. Altman Z-Score d. Montier C-Score
c - Altman Z-Score
Using the "basic accounting formula," which of the following expressions is incorrect: a. Assets - Liabilities = Shareholders Equity b. Assets = Liabilities + Shareholders' Equity c. Assets + Shareholders Equity = Liabilities
c - Assets + Shareholders Equity = Liabilities
The amount which a company expends on share repurchases can be found on the: a. Cash Flow Statement b. Statement of Shareholders Equity c. Both A and B
c - Both A and B
Barrons called Bill Ackman's trades at the start of the Corona Virus the "Greatest Trade of All Time." In March 2020, Ackman turned a $27 million investment into $2.6 billion. What instrument did Ackman use in commotion with this trade? a. Bought Puts on the S&P 500. b. Short sale of the S&P 500 c. Bought CDS credit protection on Bond Indices d. Sold global Bond Indices Short
c - Bought CDS credit protection on Bond Indices
Total assets divided by total liabilities is a measure of: a. Profitability b. Capacity c. Capital
c - Capital
Which of the following is not a price event? A change in: a. Market Liquidity b. Investor Mood c. Cash Flow
c - Cash Flow
Norinchukin Bank is notable as one of the largest holders of what class of Fixed Income Securities? a. US Treasury TIPS Securities b. Adjustable Rate Notes c. Collateralized Loan Obligations d. Bank Trust Preferreds
c - Collateralized Loan Obligations
Company A and B have identical ROA's. What primary factor would result in Company A having a higher ROE. a. Company A has greater Shareholders' Equity b. CompanyB has greater Shareholders' Equity c. Company A has greater leverage d. Company B has greater leverage
c - Company A has greater leverage
The formula to calculate a company's Net Working Capital is: a. Total Assets minus Total Liabilities b. Cash plus Accounts Receivable minus Current Liabilities c. Current Assets minus Current Liabilities
c - Current Assets minus Current Liabilities
The process that accountants, debt underwriters, equity underwriters, ratings agencies and investors use in evaluating the accuracy of a company's financial and business representation is called: a. Auditing b. Vetting c. Due Diligence
c - Due Diligence
Which of the following is often described as a residual interest in a company? a. Assets b. Liabilities c. Equity
c - Equity
BA has announced that it is consolidating it manufacture of all 787 variants to Charleston, SC from Everett, Washington. This will likely result in all of the following except: a. Restructuring Charges b. Fixed Asset Impairment Charges at its Everett facility c. Inventory impairment of the 787s previously manufactured at Everett d. Increased capital expenditures at the Charleston facility
c - Inventory impairment of the 787s previously manufactured at Everett
A company's Accounts Receivable decreased by $120. Its inventory increased by $100. Its Accounts Payable increased by $250. Ignoring any other changes, how much did these working capital items impact the cash position of the company. a. Its cash increased by $230 b. Its cash decreased by $230 c. Its cash increased by $270 d. Its cash decreased by $270
c - Its cash increased by $270
Someone said to work in the "rates market" is primarily concerned about which of the following? a. Corporate earnings b. Corporate Credit risk c. Monetary and fiscal policy
c - Monetary and fiscal policy
You have been analyzing your company and want to adjust a pre-tax number to its after tax equivalent. You would: a. Multiply the number by the tax rate. b. Multiply the number by (1+tax rate) c. Multiply the number by (1-tax rate)
c - Multiply the number by (1-tax rate)
Ratings Agencies assign ratings to securities to indicate which of the following? a. Expected Loss b. Loss Given Default c. Probability of Default
c - Probability of Default
The ability of a company to repay its debt overrun extended period of time is referred to as a company's: a. Liquidity b. Leverage c. Solvency
c - Solvency
Current Assets minus Current Liabilities equals? a. Cash Flow Operations b. Current Ratio c. Working Capital
c - Working Capital
A company chooses to discontinue one of its operations. This change requires that, if practical, the company reinstate its financial statements for: a. all prior periods b. current and future periods c. prior periods shown in a report
c - prior periods shown in a report
Which of the following best describes why the notes that accompany the financial statements are required? the notes: a. permit flexibility in statement preparation b. standardize financial reporting across companies c. provide information necessary to understand the financial statements
c - provide information necessary to understand the financial statements
The WSJ reported this week that GE has received a "Wells Notice" regarding the accounting in its Insurance subsidiaries. This notice was sent by: a. Its external auditors b. Its internal audit department c. the SEC d. the National Association of Insurance Regulators
c - the SEC
A solvency analysis is designed to measure: a. the liquidity of a company b. the ability of a company to meet it obligations over the next 12 months c. the ability of a company to meet it long term obligations
c - the ability of a company to meet it long term obligations
Which of the following best describes the role of financial statement analysis? a. to provide information about a company's performance b. to provide information about a company's changes in financial position c. to form expectations about a company's future performance and financial position
c - to form expectations about a company's future performance and financial position
LMT has announced additional stock buybacks in 2020. The impact on its shareholder's equity account will be: a. to increase Retained Earnings b. to decrease Paid in Capital c. to increase Treasury Stock d. to decrease Accumulated Other Comprehensive Income
c - to increase Treasury Stock
Based on the single ratio of Liabilities/Total Assets, which ratio would indicate the lowest level of leverage? a. 1.27 b. .85 c. .43 d. .25
d - .25
Which of the following US Government web sites is a reliable source of economic data? a. EDGAR b. TED c. MICK d. FRED
d - FRED
The Quick ratio excludes which asset from the calculation compared to the Current Ration? a. All accruals b. Cash c. Accounts Receivable d. Inventory
d - Inventory