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Adventis FMC Level 1 Exam Complete Solutions | Already Passed| Verified 2025
Typology: Exams
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what is the purpose of the income statement? What does it indicate? - ✔✔to show stakeholders if the firm made or lost money during the period being reported it indicates how revenues are transformed into net income define: Revenue - ✔✔the amount charged for the delivery of goods and services define: COGS - ✔✔direct costs of producing revenue define: Operating Expense - ✔✔all other expenses required to run the business what does Operating Income indicate?
Another work for Operating profit is EBIT what does net profit indicate for the shareholder? - ✔✔indicates the increase in shareholder value resulting from the operations of the firm list the general flow of the income statement - ✔✔revenue (COGS) Gross Profit (Operating expense) Operating Income (non Op Expense) (Tax) Net Income what does the balance sheet show - ✔✔it is a financial statement that represents the financial position of the company on a particular date Balance sheet: Assets are what the company , Liabilities are what the company , and equity is the ------ ------
A negative change in working capital indicates that it is a SOURCE of cash. the firm grows on the limbs of their suppliers, and this cash received is positive is short term debt included when calculating the working capital for the firm? - ✔✔no, short term debt isn't included because working capital= (non-cash current asset)- (NON-DEBT current liabilities) 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:
the 4 most common line items are:
A positive value for CAPX indicated that it is a USE of cash, and should be take away value from the firm cash account true or false: Share repurchases are a SOURCE of cash, and should be reported as a POSITIVE value on the CF Statement - ✔✔FALSE: the firm must use cash to repurchase its own shares, this means that share repurchases are a USE of cash and should be a NEGATIVE number on the CF statement. explain how repurchases are a form of returning capital to equity holders? - ✔✔when the firm purchases shares, it takes away from the existing shares outstanding. shareholder holding some of the remaining shares outstanding will now have a higher earnings per share. the increased earnings is a form of returning capital to the shareholder Dividends:
(CF from Operations) - (Capital Expenditures) Liquidity Ratios: