1 What causes the asset turnover ratios to be too low?

A. Downsizing.

B. Too small an investment in assets and robust sales.

C. High profitability.

D. Too large an investment in assets and sluggish sales.

2 A company has the following information:

• 2015 Retained Earnings - $12.0 billion
• 2016 Net Income - $3.5 billion
• 2016 CAPEX - $200.0 million
• 2016 Preferred Dividends - $100.0 million
• 2016 Cash Dividends - $400.0 million
• What is the retained earnings balance at the end of 2016?

A. $14.8 billion

B. $15.2 billion

C. $15.0 billion

D. $15.5 billion

Let's say that we're creating projections for a company, and in its historical filings Depreciation & Amortization and Stock-Based Compensation are NOT listed as separate items on its income statement. Which income statement line items might INCLUDE these figures, and how should we project these items in future years?

A. If they're not listed on the income statement, the company does not have significant expenses in either category so we don't need to do anything.

B. They almost always show up exclusively in COGS; you should break them out as separate line items and project them separately going forward.

C. They always show up exclusively in operating expenses; you only need them for the cash flow statement so you don't need to break them out separately in income statement projections.

D. They may show up in either operating expenses or COGS, or in both; it's better to break them out as separate line items by modifying the historical statements and then project them separately going forward.

Which of the following is NOT a profitability ratio?

A. Return on Asset

B. Net Profit Margin

C. Cash Conversion Cycle

D. Gross Profit Margin

Which of the following statements is incorrect?

A. Common-size financial statements allow analysts to compare different sized companies.

B. Common-size balance sheets have all items expressed as a percentage of total assets.

C. Common-size income statements have all items expressed as a percentage of net income.

D. Common-size financial statements allow analysts to identify changes within a company over time.

Which is not true when preparing the Statement of Cash Flows section of the forecast model?

A. Purchases of investments and intangible assets will be reported as cash outflows from investing activities.

B. Dividend payments will be reported as cash outflows for financing activities.

C. Share buybacks will be reported as cash outflows for investing activities.

D. Issuance of stock and debt will be reported as cash inflows from financing activities.

An analyst is reviewing the 2015 and 2016 financial statements for Blackstone Industries.She wishes to calculate a ratio that has an income statement item in the numerator and a balance sheet item in the denominator.

A. Divide the average of the income statement item for 2015 and 2016 by the ending value of the balance sheet item.

B. Divide the 2016 income statement item amount by the average of the balance sheet item for 2015 and 2016.

C. Divide the average of the income statement item for 2015 and 2015 by the average of the balance sheet item for 2015 and 2016.

D. Divide the 2016 income statement item amount by the 2016 ending value of the balance sheet item.

Two frameworks used for valuation are intrinsic valuation - perpetuity method (DCF) and relative valuation - Exit EBITDA Multiple method - (Comps).Which of the following statements is not correct.

A. Relative valuation is derived by comparing a company to its comparable peers.

B. Because the DCF model rarely yields the same value as the Comps model, the DCF model is viewed as having less value when analyzing a firm.

C. In comps, values are typically compared relative to a measure of the firm's profitability.These ratios are called "multiples".

D. DCF is derived from the fundamental analysis of the company's cash flow generation potential.

There are two main valuation types: relative (based on what other companies are worth) and intrinsic (based on how much cash flow the company generates). Which of the following choices is an example of INTRINSIC valuation?

A. Leveraged Buyout (LBO) Model

B. Precedent Transactions

C. Public Company Comparable

D. Discounted Cash Flow (DCF)