Wall Street Prep Premium Exam
Questions and answers
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent) item?
- correct answer-Extraordinary gains/losses
what is false about depreciation and amortisation - correct answer-D&A may be classified
within interest expense
Company X's current assets increased by $40 million from 2007-2008 while the companies
current liabilities increased by $25 million over the same period. the cash impact of the
change in working capital was - correct answer-a decrease of 15 million
the final component of an earnings projection model is calculating interest expense. the
calculation may create a circular reference because - correct answer-interest expense
affects net income, which affects FCF, which affects the amount of debt a company pays
down, which, in turn affects the interest expense, hence the circular reference
a 10-q financial filing has all of the following characteristics except - correct answer-issued
four times a year.
Depreciation Expense found in the SG&A line of the income statement for a manufacturing
firm would most likely be attributable to which of the following - correct answer-computers
used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%, and
projected SG&A expenses of $2billion, what is the company's operating (EBIT) margin? -
correct answer-45%
A company has the following information, 1. 2014 revenues of $5 billion,2013 Accounts
receivable of $400 million, 2014 accounts receivable of $600 million, what are the days sales
outstanding - correct answer-36.5
A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
• 2014 Accounts receivable of $600 million
• 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
• 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What are the inventory days for the company? - correct answer-65.7 days
, Which of the following is true - correct answer-Coca Cola's brand name is not reflected as an
intangible asset on its balance sheet
A company has the following information:
• 2014 share repurchase plan of $4 billion
• Average share price of $60 for the year 2013
• Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your financial model?
- correct answer-60.6 million
non-controlling interest - correct answer-is an expense on the income statement and equity o
the balance sheet
A company has the following information:
• 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
• Capex of $200 million in 2014
• Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
What is the retained earnings balance at the end of 2014? - correct answer-15 billion
in order to find out how much cash is available to pay down short term debt, such as
revolving credit line, you must take - correct answer-beginning cash balance + pre-debt cash
flows - min. cash balance - required principal payments of LT and other debt
to calculate interest expense in the future, you should do which of the following - correct
answer-apply a weighted average interest rate times the average debt balance over the
course of the year
enterprise (transaction) value represents the: - correct answer-value of all capital invested in
a business
A debt holder would be primarily concerned with which of the following multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - correct answer-1 and 3 only
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million shares
outstanding. The company has net debt of $300 million. After building an earnings model for
Company X, you have projected free cash flow for each year through 2020 as follows:
Year 2014 2015 2016 2017 2018 2019 2020
Free Cash Flow 110 120 150 170 200 250 280
You estimate that the weighted average cost of capital (WACC) for Company X is 10% and
assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final
projected year. Estimate the present value of the projected free cash flows through 2020,
Questions and answers
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent) item?
- correct answer-Extraordinary gains/losses
what is false about depreciation and amortisation - correct answer-D&A may be classified
within interest expense
Company X's current assets increased by $40 million from 2007-2008 while the companies
current liabilities increased by $25 million over the same period. the cash impact of the
change in working capital was - correct answer-a decrease of 15 million
the final component of an earnings projection model is calculating interest expense. the
calculation may create a circular reference because - correct answer-interest expense
affects net income, which affects FCF, which affects the amount of debt a company pays
down, which, in turn affects the interest expense, hence the circular reference
a 10-q financial filing has all of the following characteristics except - correct answer-issued
four times a year.
Depreciation Expense found in the SG&A line of the income statement for a manufacturing
firm would most likely be attributable to which of the following - correct answer-computers
used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%, and
projected SG&A expenses of $2billion, what is the company's operating (EBIT) margin? -
correct answer-45%
A company has the following information, 1. 2014 revenues of $5 billion,2013 Accounts
receivable of $400 million, 2014 accounts receivable of $600 million, what are the days sales
outstanding - correct answer-36.5
A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
• 2014 Accounts receivable of $600 million
• 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
• 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What are the inventory days for the company? - correct answer-65.7 days
, Which of the following is true - correct answer-Coca Cola's brand name is not reflected as an
intangible asset on its balance sheet
A company has the following information:
• 2014 share repurchase plan of $4 billion
• Average share price of $60 for the year 2013
• Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your financial model?
- correct answer-60.6 million
non-controlling interest - correct answer-is an expense on the income statement and equity o
the balance sheet
A company has the following information:
• 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
• Capex of $200 million in 2014
• Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
What is the retained earnings balance at the end of 2014? - correct answer-15 billion
in order to find out how much cash is available to pay down short term debt, such as
revolving credit line, you must take - correct answer-beginning cash balance + pre-debt cash
flows - min. cash balance - required principal payments of LT and other debt
to calculate interest expense in the future, you should do which of the following - correct
answer-apply a weighted average interest rate times the average debt balance over the
course of the year
enterprise (transaction) value represents the: - correct answer-value of all capital invested in
a business
A debt holder would be primarily concerned with which of the following multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - correct answer-1 and 3 only
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million shares
outstanding. The company has net debt of $300 million. After building an earnings model for
Company X, you have projected free cash flow for each year through 2020 as follows:
Year 2014 2015 2016 2017 2018 2019 2020
Free Cash Flow 110 120 150 170 200 250 280
You estimate that the weighted average cost of capital (WACC) for Company X is 10% and
assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final
projected year. Estimate the present value of the projected free cash flows through 2020,
