HBX CORE FINAL EXAM(2026-2027)||
57 QUESTIONS AND ANSWERS
(ALREADY GRADED A)
Net Present Value - ANSWER-Is a calculation of the present values of all the cash
inflows and outflows of a project or investment.
Excel formula =NPV(E4,B3:B12)+B2
Remember,for NPV you have to manually add the negative outflow from time zero
related to the initial investment.
Asset/Expense Accounts - ANSWER-Asset and expense accounts increase with
debit and decrease with credit.
Income Statement - ANSWER-Shows a company's financial performance, because it
shows the accumulation of all nominal accounts over a period of time.
Gross Profit - ANSWER-Sales Revenue minus COGS.
Accounts Payable Turnover - ANSWER-Credit Purchases/Average Accounts
Payable Balance.
Internal Rate of Return (IRR) - ANSWER-The discount rate that sets the net present
value (NPV) of a project equal to zero. The IRR allows us to find the percentage rate
that would be earned for a given set of cash flows.
Gross Profit Margin Calculation - ANSWER-Gross Profit/Revenue =Gross Profit
Margin
Leverage Ratio Calculation - ANSWER-Average Total Assets/Average Equity.
Suggested Formula =Average (B11,D5)/Average (Sum(B16:B18),D8).
Present Value Calculation - ANSWER-It is calculated by multiplying the annual
payment by the present value of an annuity factor.
$18,000*6.71008=$120,781
Return on Equity (ROE) - ANSWER-The return that a business generates during a
period on equity invested in the business by the owners of the business.
Measured in DuPont Framework.
Return on Investment (ROI) - ANSWER-The return or profit received as a result of
investing funds.
, Not measured by the DuPont Framework.
Cash Conversion Cycle (CCC) - ANSWER-The number of days between when a
company pays for inventory purchases and when a company collects from
customers.
Not measured by the DuPont Framework.
Interest Coverage Ratio - ANSWER-The number of times a company can cover its
interest expense only using its earnings before interest and tax.
Not part of the DuPont Framework.
Deferred Tax Asset - ANSWER-Arises when taxable income exceeds Income Before
Taxes due to a temporary timing difference.
When a deferred Tax Asset arises it means a company is recognizing Tax Expense
now on an amount of income that will be reflected in the financial records later.
Income Before Taxes - ANSWER-The amount shown on the Income Statement after
all expenses have been taken away from the revenue for the period but before any
tax expense for the period. May also be referred to as Pretax Profit.
Profit Margin - ANSWER-(Net Income/Sales ) measures the ability of a company to
make a profit relative to revenue generated during a period. A Profit Margin of 19%
tells us that for every $100 in sales, $19 ended up in Net Income.
Profit Margin - ANSWER-Profit Margin (Net Income/Sales) measures the ability of a
company to make a profit relative to revenue generated during a period.
In Excel Net Income/Revenue.
Average Collection Period - ANSWER-365/AR Turnover =365/(Credit Sales/
Average AR Balance)
Current Ratio - ANSWER-The current ratio is a measure of a business' ability to pay
its short term obligations.
Quick Ratio - ANSWER-measures the ability of a company to use its quick assets to
pay off its short-term debts.
Debt to Equity Ratio - ANSWER-measures a company's leverage, not ability to pay
off its debts.
Indirect Method to create the Statement of Cash Flows - ANSWER-A gain, an
increase in operating assets, and a decrease in operating current liabilities would all
need to be subtracted from net income in order to convert net income into operating
cash flow when using the indirect method to create the Statement of Cash Flows.
57 QUESTIONS AND ANSWERS
(ALREADY GRADED A)
Net Present Value - ANSWER-Is a calculation of the present values of all the cash
inflows and outflows of a project or investment.
Excel formula =NPV(E4,B3:B12)+B2
Remember,for NPV you have to manually add the negative outflow from time zero
related to the initial investment.
Asset/Expense Accounts - ANSWER-Asset and expense accounts increase with
debit and decrease with credit.
Income Statement - ANSWER-Shows a company's financial performance, because it
shows the accumulation of all nominal accounts over a period of time.
Gross Profit - ANSWER-Sales Revenue minus COGS.
Accounts Payable Turnover - ANSWER-Credit Purchases/Average Accounts
Payable Balance.
Internal Rate of Return (IRR) - ANSWER-The discount rate that sets the net present
value (NPV) of a project equal to zero. The IRR allows us to find the percentage rate
that would be earned for a given set of cash flows.
Gross Profit Margin Calculation - ANSWER-Gross Profit/Revenue =Gross Profit
Margin
Leverage Ratio Calculation - ANSWER-Average Total Assets/Average Equity.
Suggested Formula =Average (B11,D5)/Average (Sum(B16:B18),D8).
Present Value Calculation - ANSWER-It is calculated by multiplying the annual
payment by the present value of an annuity factor.
$18,000*6.71008=$120,781
Return on Equity (ROE) - ANSWER-The return that a business generates during a
period on equity invested in the business by the owners of the business.
Measured in DuPont Framework.
Return on Investment (ROI) - ANSWER-The return or profit received as a result of
investing funds.
, Not measured by the DuPont Framework.
Cash Conversion Cycle (CCC) - ANSWER-The number of days between when a
company pays for inventory purchases and when a company collects from
customers.
Not measured by the DuPont Framework.
Interest Coverage Ratio - ANSWER-The number of times a company can cover its
interest expense only using its earnings before interest and tax.
Not part of the DuPont Framework.
Deferred Tax Asset - ANSWER-Arises when taxable income exceeds Income Before
Taxes due to a temporary timing difference.
When a deferred Tax Asset arises it means a company is recognizing Tax Expense
now on an amount of income that will be reflected in the financial records later.
Income Before Taxes - ANSWER-The amount shown on the Income Statement after
all expenses have been taken away from the revenue for the period but before any
tax expense for the period. May also be referred to as Pretax Profit.
Profit Margin - ANSWER-(Net Income/Sales ) measures the ability of a company to
make a profit relative to revenue generated during a period. A Profit Margin of 19%
tells us that for every $100 in sales, $19 ended up in Net Income.
Profit Margin - ANSWER-Profit Margin (Net Income/Sales) measures the ability of a
company to make a profit relative to revenue generated during a period.
In Excel Net Income/Revenue.
Average Collection Period - ANSWER-365/AR Turnover =365/(Credit Sales/
Average AR Balance)
Current Ratio - ANSWER-The current ratio is a measure of a business' ability to pay
its short term obligations.
Quick Ratio - ANSWER-measures the ability of a company to use its quick assets to
pay off its short-term debts.
Debt to Equity Ratio - ANSWER-measures a company's leverage, not ability to pay
off its debts.
Indirect Method to create the Statement of Cash Flows - ANSWER-A gain, an
increase in operating assets, and a decrease in operating current liabilities would all
need to be subtracted from net income in order to convert net income into operating
cash flow when using the indirect method to create the Statement of Cash Flows.
