FINANCIAL STATEMENT MODELLING WITH LATEST VERIFIED QUESTIONS AND CORRECT ASWERS GRADED A+

FINANCIAL STATEMENT MODELLING WITH LATEST VERIFIED QUESTIONS AND CORRECT ASWERS GRADED A+ Which formula is used to check that a Balance Sheet has been built correctly? - ANS-Total Assets = Total Liabilities + Stockholders' Equity How do you calculate Inventory Turns? - ANS-COGS / Inventory What is the last step in creating our debt paydown and interest schedule? - ANS-Interest Calculation What happens if our cash available for mandatory debt paydown is negative? - ANS-We must draw on the revolver If no additional debt is raised and there are fixed, annual debt payments, what will happen to short-term debt from year to year? - ANS-Stay the same Which of the below accurately describes the revolver logic in our model? - ANS-Nike needs cash - draw on revolver, Nike does not need cash - pay down revolver if there is a balance, Nike does not need cash - do nothing if there is no revolver balance Why is the revolver interest rate lower than our long-term interest rate? - ANS-It has higher seniority What balance did we use for debt to calculate our annual interest expense? - ANS-Average of beginning and ending balance of debt What interest rate did we use for the interest income on our cash? - ANS-0.50% What is the main source of circularity in our model? - ANS-The debt / interest schedule What is the driver for the number of shares that we repurchase? - ANS-Projected P/E multiple, The $ amount of shares to be repurchased, Projected share price How do you calculate Days Sales Outstanding? - ANS-Accounts Receivable / Revenue * 365 We can project prepaid expenses by assuming its percentage of... - ANS-Revenue How do you calculate Net Working Capital? - ANS-Total non-cash current assets - Total non-debt current liabilities Depreciation is to PP&E as Amortization is to... - ANS-Intangible Assets. We use this driver to project Capex: - ANS-% of revenue When calculating the ending balance of a line item in a projected year, we reference last year's ending balance as the beginning balance (T or F) - ANS-TRUE Beginning Intangible Balance is $10 million; Amortization = $1.5 million; Additions = $0.75 million. What is the ending balance? - ANS-$9.25 million Assuming Intangible Balance is 10.0 in C11, amortization is -1.5 in C12, and additions is 0.75 in C13, how would you quickly calculate ending Tangible Balance in C14? - ANS-Alt + = In the Cash Flow Statement, we add back Depreciation and Amortization to Net Income because... - ANS-They are non-cash expenses In what section of the cash flow statement does Capex belong? - ANS-Investing Share repurchases decrease Stockholder's Equity (T or F) - ANS-True How do we project Dividends? - ANS-Assumed Dividend Payout Ratio * Projected Net Income How do we link the Cash Flow Statement (CFS) to the Balance Sheet (BS)? - ANS-(CFS) Ending Cash = (BS) Same Year's Cash Balance Debt issuance decreases long-term debt (T or F) - ANS-False What is a revolver? - ANS-A corporation's "credit card" that is used to finance working capital needs WSO's Banana Stand has an average revolver balance of $10 million with an interest rate of 5%. It also has an average long-term debt balance of $50 million with an interest rate of 2.5%. What is its total interest expense for the year? - ANS-$1.75 million Circularity is caused when you have multiple cells' formulas referencing each other. (T or F) - ANS-True WSO's Banana Stand has a total interest expense of $2 million and has $100 million in cash that earns 1%. What is its net interest expense (income)? - ANS-$1 million Which of these activities is not dilutive (anti-dilutive)? - ANS-Share Repurchasing We use basic shares outstanding when calculating EPS (T or F) - ANS-False