Question 2)

Which of the following statements is correct?

a) None of the other answers is correct.

b) Change in cash should be included as part of change in working capital when calculating free cash flows.

c) Working capital is equal to all current assets minus all current liabilities.

d) Straight line depreciation allows you to reduce taxes earlier relative to accelerated depreciation.

e) Days sales outstanding indicates how well a company collects its accounts receivables.

Question 3)

Which of the following statements is correct?

a) If a company has a significant number of stock options outstanding, we should also consider diluted EPS when calculating PE ratios.

b) EBITDA is normally compared with the market capitalization of the firms equity.

c) Return on investment ratios compare the profitability of the firm with market prices.

d) PB ratios are useful when comparing companies that have high R&D spending.

e) None of the other answers is correct.