FIN 3312 TXST EXAM 1 REVIEW
QUESTIONS AND ANSWERS GRADED A+
2025/2026
Formula sheet - ANS Balance Sheet Identity Total Assets = Total Liabilities + Stockholders'
Equity
Net Working Capital (NWC) = Current Assets - Current Liabilities
Financial Cash Flow Identity CF from Assets = CF to Creditors + CF to Stockholders
Financial Cash Flow is also defined as OCF - Capital Spending - Additions to NWC
Operating Cash Flow (OCF) EBIT + Depreciation & Amortization - Taxes
Capital Spending (CapEx) (Ending net Fixed Assets - Beginning net Fixed Assets) + Depreciation
Additions to NWC Most Recent Year's NWC minus Previous Year's NWC
Each Year's NWC equals (Current Assets minus Current Liabilities)
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Note: All calculations will be as per the book formulas so if you follow those the positive versus
negative issue is as defined in the book. Keep in mind, for example, if the firm acquires more
new assets then it sells, this means the firm "spent" money (used cash) for this component of
its cash flow calculation.
Cash Flow to Creditors Interest Paid minus Net New Borrowing
Net New Borrowing (Ending Long-Term Debt) minus (Beginning Long-term Debt)
Cash Flow to Stockholders Dividends Paid minus Net New Equity
Net New Equity (Ending Common Stock) minus (Beginning Common Stock)
Remember the change in retained earnings is not part of calculating Net New Equity!
𝑅𝑂𝐸 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 =𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝑆𝑎𝑙𝑒𝑠 × 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠× 𝑇𝑜𝑡𝑎𝑙
𝐴𝑠𝑠𝑒𝑡𝑠 /𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 PM TAT EM
Pm= 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝑆𝑎𝑙𝑒𝑠
TAT= 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
EM = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 /𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑂𝐴= 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 =𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒𝑆𝑎𝑙𝑒𝑠 × 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Capital Intensity Ratio = 1/(TAT) ROE = ROA x EM
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 =(𝑇𝐴−𝑇𝐸)𝑇𝐴 𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 =𝑇𝐷𝑇𝐸 𝐸𝑀 =𝑇𝐴𝑇𝐸 =1+ 𝑇𝐷 𝑇𝐸⁄
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑆𝑎𝑙𝑒𝑠/𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒
𝐷𝑎𝑦𝑠′𝑆𝑎𝑙𝑒𝑠 𝑖𝑛 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 = 365 𝑑𝑎𝑦𝑠𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟
Sustainable Growth 𝑆𝑢𝑠𝑡𝑎𝑖𝑛𝑎𝑏𝑙𝑒 𝑔 = 𝑅𝑂𝐸×𝑏1−(𝑅𝑂𝐸×𝑏) wher
The Leo Garza Corporation has $121,000 in current assets and $109,000 in current liabilities.
These values as referred to as the firm's:
A. capital structure.
B. cash equivalents.
C. working capital.
D. net assets.
E. fixed accounts. - ANS C. working capital.
Maddison U. has an operating cash flow of $78,460, depreciation expense of $8,960, and taxes
paid of $21,590. A partial listing of its balance sheet accounts is as follows: What is the amount
of the change in net working capital? Ending NWC minus Begiterm-6nning NWC.
Beginning balance Ending balance
Current Assets: $141,680. $138,509
Net fixed Assets. $687,810. $703,411
Current liabilities. $87,340. $91,516
Long-term Debt. $267,000. $248,000
A. A decrease of $7,347
B. An increase of $7,347
C. Net working capital did not change
D. An increase of $4,176
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS GRADED A+
2025/2026
Formula sheet - ANS Balance Sheet Identity Total Assets = Total Liabilities + Stockholders'
Equity
Net Working Capital (NWC) = Current Assets - Current Liabilities
Financial Cash Flow Identity CF from Assets = CF to Creditors + CF to Stockholders
Financial Cash Flow is also defined as OCF - Capital Spending - Additions to NWC
Operating Cash Flow (OCF) EBIT + Depreciation & Amortization - Taxes
Capital Spending (CapEx) (Ending net Fixed Assets - Beginning net Fixed Assets) + Depreciation
Additions to NWC Most Recent Year's NWC minus Previous Year's NWC
Each Year's NWC equals (Current Assets minus Current Liabilities)
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Note: All calculations will be as per the book formulas so if you follow those the positive versus
negative issue is as defined in the book. Keep in mind, for example, if the firm acquires more
new assets then it sells, this means the firm "spent" money (used cash) for this component of
its cash flow calculation.
Cash Flow to Creditors Interest Paid minus Net New Borrowing
Net New Borrowing (Ending Long-Term Debt) minus (Beginning Long-term Debt)
Cash Flow to Stockholders Dividends Paid minus Net New Equity
Net New Equity (Ending Common Stock) minus (Beginning Common Stock)
Remember the change in retained earnings is not part of calculating Net New Equity!
𝑅𝑂𝐸 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 =𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝑆𝑎𝑙𝑒𝑠 × 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠× 𝑇𝑜𝑡𝑎𝑙
𝐴𝑠𝑠𝑒𝑡𝑠 /𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 PM TAT EM
Pm= 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝑆𝑎𝑙𝑒𝑠
TAT= 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
EM = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 /𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑂𝐴= 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 =𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒𝑆𝑎𝑙𝑒𝑠 × 𝑆𝑎𝑙𝑒𝑠/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Capital Intensity Ratio = 1/(TAT) ROE = ROA x EM
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 =(𝑇𝐴−𝑇𝐸)𝑇𝐴 𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 =𝑇𝐷𝑇𝐸 𝐸𝑀 =𝑇𝐴𝑇𝐸 =1+ 𝑇𝐷 𝑇𝐸⁄
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑆𝑎𝑙𝑒𝑠/𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒
𝐷𝑎𝑦𝑠′𝑆𝑎𝑙𝑒𝑠 𝑖𝑛 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 = 365 𝑑𝑎𝑦𝑠𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟
Sustainable Growth 𝑆𝑢𝑠𝑡𝑎𝑖𝑛𝑎𝑏𝑙𝑒 𝑔 = 𝑅𝑂𝐸×𝑏1−(𝑅𝑂𝐸×𝑏) wher
The Leo Garza Corporation has $121,000 in current assets and $109,000 in current liabilities.
These values as referred to as the firm's:
A. capital structure.
B. cash equivalents.
C. working capital.
D. net assets.
E. fixed accounts. - ANS C. working capital.
Maddison U. has an operating cash flow of $78,460, depreciation expense of $8,960, and taxes
paid of $21,590. A partial listing of its balance sheet accounts is as follows: What is the amount
of the change in net working capital? Ending NWC minus Begiterm-6nning NWC.
Beginning balance Ending balance
Current Assets: $141,680. $138,509
Net fixed Assets. $687,810. $703,411
Current liabilities. $87,340. $91,516
Long-term Debt. $267,000. $248,000
A. A decrease of $7,347
B. An increase of $7,347
C. Net working capital did not change
D. An increase of $4,176
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
