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Adventis FMC Level 1 MC Practice Exam Complete Solutions | Already Passed| Verified
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Adventis FMC Level 1 MC Practice Exam Complete Solutions | Already Passed| Verified
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Adventis FMC Level 1 MC PracticeExam Complete Solutions | Already
Passed| Verified
which financing is cheaper for the firm and less risky for the investor:
Debt or Equity Financing
Explain why its less riskier? - ✔✔debt financing is cheaper and less risky
debt holders have a priority claims on the firm's assets if the firm goes bankrupt
while equity holder have no guarantee that they will get their investment back if the firm goes bankrupt
what statements will be use to derive the metrics to calculate the working capital for the firm? -
✔✔we only need to use the balance sheet
remember:
WC= non cash current assets- non debt current liabs
, all of these values can be found on the balance sheet
net debt:
-what is it?
- what financial statements do we use to derive the metrics used to calculate it? - ✔✔net debt is a key
financial metric used to determine the resulting debt the firm would have, if the firm used all its cash on
hand to [ay down their debt
we only need the balance sheet since:
net debt = total debt-cash
**both can be found on the balance sheet **
Cash Flow Statement:
- what does it show?
- what does it reconcile? - ✔✔the cash flow statement shows how changes in the balance sheet
accounts and net income affect the cash balance of the firm
it reconciles net income to changes in cash
list the 3 types of activities on the cash flow statement - ✔✔1. cash from operations
2. cash from investing
3. cash from financing
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