1. Which financial statement is considered the most useful when completing an accounting analysis focusing on the quality of a firm's earnings?

A.Statement of Shareholders' Equity

B.Statement of Cash Flows

C.Balance Sheet

D.Income Statement

2. Which of the following is incorrect?

A.In an unlevered DCF, the WACC is the appropriate discount rate because we are discounting free cash flows that belong to all providers of capital.

B.The DCF model assumes a constant WACC throughout.

C.An implied share price which is above the current share price indicates that the shares are selling at a discount.

D.The terminal value has minimal impact in the calculation of enterprise value.

3. Which of the following is an operating account on the Income Statement?

A.Interest Expense

B.Accounts Receivable

C.Cost of Goods Sold

D.Interest & dividend income

5. Which of the following produces an incorrect observation?

A.The tax shield for NOPAT calculations is based on non-operating items from the income statement.

B.The operating tax is subtracted from operating income to determine NOPAT.

C.All of the answers are correct.

D.The tax shield for NOPAT calculations is subtracted from the total tax expense to determine the tax on operating results.

E.A higher NOPAT, will typically result in a higher the return on invested capital.

6. Which of the following is typically not associated with a firm that is positioned to expand its market share?

A.Increases in gross property, plant & equipment on the balance sheet.

B.Cash outflows for CAPEX as shown on the statement of cash flows.

C.Projected increased cash outflow for prepayment of debt principal on the financing section of the statement of cash flows and the accompanying reduction of debt on the balance sheet.

D.Projected increases in selling, general & administrative expenses on the income statement.

7. The prevalent form of the DCF model inpractice is the two-stage "unlevered DCF model".Which of the following statements is not correct?

A.The enterprise value will equal Stage #1 minus Stage #2.

B.Stage #2 calculates the terminal value by estimating the value of the company at the end of stage #1 then discounting it to the present.

C.Stage #1 forecast period is typically 5-10 years.

D.Stage #1 projects unlevered FCFs using mid-year assumptions for calculating the present value of periodic cash flows.

E.All cash flows are discounted using the weighted average cost of capital (WACC).

8. Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating a return to shareholders?

A.Return on assets

B.Total asset turnover and operating profit margin

C.Gross profit margin and net profit margin

D.Return on assets and return on equity