Where in a company's financial statements is depreciation and amortization typically located?
A) Balance Sheet B) Cash Flow Statement C) Debt Schedule D) Shareholders' equity schedule B) Cash Flow Statement
An increase in accounts receivable would result in which of the following?
A) A source of...
Chapter 7: Discounted Cash Flow
Analysis - Multiple Choice Questions
and Correct Answers
Where in a company's financial statements is depreciation and amortization typically
located?
A) Balance Sheet
B) Cash Flow Statement
C) Debt Schedule
D) Shareholders' equity schedule ✅B) Cash Flow Statement
An increase in accounts receivable would result in which of the following?
A) A source of cash
B) A use of cash
C) A decrease in current liability
D) No effect on cash ✅B) A use of cash
The cash flow statement includes which of the following sections?
I. Operating activities
II. Shareholders' equity
III. Investing activities
IV. Retained Earnings
A) I & III
B) I & IV
C) II & III
D) II & IV ✅A) I & III
Which of the following would NOT be considered a current liability?
A) Accrued compensation
B) Property, plant & equipment
C) Accounts Payable
D) Accounts Receivable ✅B) Property, plant & equipment
A company had sales of $500 million, operating expenses of $50 million, and EBITDA of
$25 million during the past year. At the same time, accounts receivable increased by
$50 million. How much actual cash did the company receive during the year from its
sales?
, A) $0
B) ($25) million
C) $450 million
D) $500 million ✅C) $450 million
A company has sales of $1.0 billion and accounts receivable of $150 million in a given
year, what would its DSO be?
A) 54.00
B) 54.75
C) 15.00
D) 41.10 ✅B) 54.75
A company has a gross profit margin of 40%. Given the information below, calculate
operating income
Sales $1,000M
COGS ?
Gross Profit ?
Selling, G&A $230M
Restructuring $10M
Operating Income ?
A) $360M
B) $390M
C) $170M
D) $160M ✅D) $160M
Given the information below, calculate free cash flow.
EBITDA $250M
D&A 50M
Tax Rate 40%
Capex 45M
Increase in Net Working Capital $10M
A) $250M
B) $165M
C) $115M
D) $355M ✅C) $115M
Net working capital refers to which of the following?
A) Funds that a company uses to purchase, improve, expand or replace physical assets
B) An expense that approximates the reduction of the book value of a company's long-
term fixed assets
C) An expense that reduces the value of a company's definite life intangible assets
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