Certified Valuation Analyst CVA Financial Statement Analysis 3

Question 1

Which DuPont component isolates how efficiently a firm uses assets to generate revenue?

Accepted Answer

Asset turnover

Answer

Net profit margin

Answer

Equity multiplier

Answer

Interest coverage

Question 2

A quick ratio that is much lower than the current ratio indicates the company relies heavily on what asset?

Accepted Answer

Inventory

Answer

Cash

Answer

Accounts receivable

Answer

Marketable securities

Question 3

When computing free cash flow to the firm, why is interest expense added back (net of tax)?

Accepted Answer

FCFF measures cash available to all capital providers before financing

Answer

Interest is non-cash

Answer

Interest reduces taxes only

Answer

Interest is part of capex

Question 4

Which trend in days sales outstanding (DSO) suggests deteriorating collections?

Accepted Answer

A rising DSO over several periods

Answer

A falling DSO

Answer

A constant DSO

Answer

A negative DSO

Question 5

In valuation-oriented analysis, what does EBITDA primarily attempt to approximate?

Accepted Answer

Operating cash flow before financing and capital structure

Answer

Net income after taxes

Answer

Total shareholder equity

Answer

Retained earnings

Question 6

A company capitalizes costs that competitors expense. What is the likely effect on current-period earnings?

Accepted Answer

Reported earnings are overstated relative to peers

Answer

Earnings are understated

Answer

No effect on comparability

Answer

Cash flow is reduced

Question 7

Which working capital measure shows the net days cash is tied up in operations?

Accepted Answer

Cash conversion cycle

Answer

Current ratio

Answer

Debt-to-equity

Answer

Return on assets