1) Which of the following are included in operating current assets? I. Inventory. II. Prepaid expenses. III. Marketable securities. IV. Accounts receivable. a) None of the Above. b) I, II, and III only. c) I, II, and IV only. d) II, III, and IV only. e) I, II, III, and IV. 2) The most comprehensive method for computing operating taxes from public data is to begin with reported taxes and undo financing and non-operating items one by one. a) True. b) False. c) Neither. 3) Which of the following are operating liabilities? I. Accounts payable. II. Accrued salaries. III. Deferred revenue. IV. Income taxes payable. a) I and II only. b) II and III only. c) None of the Above. d) I, III, and IV only. e) I, II, III, and IV. 4) You are an equity analyst and have computed the following figures for two cement companies. The first, CementCo, has NOPLAT of $1,550 million, and invested capital without goodwill of $15,000 million. The second, CementExports, has NOPLAT of $1,750 million, and invested capital without goodwill of $16,000 million. If the cost of capital for both firms is 10 percent, what is the ROIC for each company? Which company is creating value in this year? a) ROIC is 10.3 percent for CementCo and 10.9 percent for CementExports; both companies are creating value. b) ROIC is 9.1 percent for CementCo and 10.9 percent for CementExports; both companies are creating value. c) ROIC is 9.1 percent for CementCo and 10.9 percent for CementExports; only CementExports is creating value. d) ROIC is 10.3 percent for CementCo and 10.9 percent for CementExports; neither of the companies is creating value. e) ROIC is 10.3 percent for CementCo and 11.2 percent for CementExports; both companies are creating value. 5) How will an increase in invested capital (IC) in a given year affect free cash flow (FCF) and ROIC if all other things are kept equal? a) It will decrease both FCF and ROIC. b) It will increase both FCF and ROIC. c) It will increase FCF but decrease ROIC. d) It will decrease FCF but increase ROIC. e) It will not affect either FCF or ROIC.

10) In order to get a more accurate estimate of revenue growth, an analyst should remove the effects of which of the following? I. Deferred taxes. II. Changes in currency values. III. Mergers and acquisitions. IV. Changes in accounting policies. a) I and II only. b) I and III only. c) III and IV only. d) None of the Above. e) II, III, and IV only. 11) The companys ability to meet short-term obligations is measured with interest coverage ratios that can incorporate several different measures of earnings. Which of the following is NOT one of those measures of earnings? a) Earnings before interest, taxes, and amortization (EBITA). b) Earnings before interest, taxes, depreciation, and amortization (EBITDA). c) Earnings before interest, taxes, amortization, and preferred dividends (EBITAD). d) Earnings before interest, taxes, depreciation, amortization, and rental expense (EBITDAR). 12) If NOPLATt+1 = $1,200, g = 2%, RONIC = 15%, WACC = 13%, then continuing value in year t is closest to: a) $8,741. b) $7,933. c) $9,133. d) $10,000. e) $9,454. 13) Which of the following concerning deferred taxes classified as non-operating are true? I. They will not be included in a discounted free cash flow (FCF) valuation. II. They can be valued as part of their corresponding accounts (as in the case of pensions). III. They can be valued separately (as in the case of net operating loss carryforwards). IV. They can be ignored as accounting conventions (as in the case of nondeductible amortization). a) I and II only. b) II and III only. c) II and IV only. d) I, II, III, and IV. e) None of the Above. 14) Nonconsolidated subsidiaries and equity investments should be measured and valued separately from other items when calculating a firms invested capital. a) True. b) False. c) Both. 15) Which metric is the best indicator of a companys operating performance? a) ROE. b) ROA. c) ROIC. d) EPS. e) P/E. 16) Which of the following are operating deferred tax assets or deferred tax liabilities? I. Non-deductible intangibles. II. Tax loss carry-forwards. III. Accelerated depreciation. IV. Pension and postretirement benefits. V. Warranty reserves. a) I, II, and IV. b) III and V. c) I, III, and V. d) II, IV, and V. e) I, II, III, IV, and V. 17) Multinational Co. (MNC) generated $1,500 million in domestic earnings before interest, taxes, and amortization (EBITA). MNC amortizes intangible assets at $275 million per year and takes a $160 million interest expense. MNCs statutory (domestic) tax rate is 21.5 percent on earnings before taxes, but only 15 percent on foreign operations. MNC had $150 million of pre-tax foreign income and generates $35 million in ongoing research and development (R&D) tax credits. What is its effective tax rate on pre-tax profits? a) 16.7 %. b) 17.8 %. c) 21.5 %. d) 23.3 %. e) 10.8 %. 18) How should an analyst treat goodwill and acquired intangible when computing the version of ROIC that will only measure the competiveness of the underlying business? a) Remove goodwill but not acquired intangibles from the computation. b) Remove acquired intangibles but not goodwill from the computation. c) Remove neither goodwill nor acquired intangibles from the computation. d) Remove both goodwill and acquired intangibles from the computation. e) Ignore them both and hope this problem goes away. 19) When calculating free cash flows, which of the following is/are NOT something that should be subtracted from gross cash flow (Remember that gross cash flow = OCF = NOPLAT + depreciation)? a) Change in operating working capital. b) Change in outstanding debt. c) Net capital expenditures. d) Investment in goodwill and acquired intangibles. e) All of the above. 20) Liquidity measures the companys ability to meet obligations over the long term. a) True. b) False. c) I dont know. 21) Leverage measures the companys ability to meet obligations over the short term. a) True. b) False