Venture Capitalization Midterm Review Guide
Formulas to Memorize:
*always reconcile retained earnings beginning RE + net income – dividends = end RE Gross Profit Margin = gross profit / sales revenue
EBDAT = cash fixed costs / gross profit margin
△Cash = beginning cash – ending cash
Cash Build = sales – △accounts receivable
Cash Burn = add uses, subtract sources
Current = current assets / current liabilities
Quick = (current assets – average inventories) / current liabilities
NWC= (current assets – current liabilities) / total assets
TD/TA = total debt / total assets
CL/TD = current liabilities / total debt
Interest Coverage = EBITDA / interest
GPM = gross profit / sales
NPM = net profit / sales
Sales/TA = sales / total assets
ROA = net income / average total assets
ROE = net income / average owner’s equity
C3 = (inventorytosale conversion period + salestocash conversion period) – purchaseto payment period
IS = average inventories / (COGS/365)
SC = accounts receivable / (net sales/365)
PP = average payables / (COGS/365)
Things to Know How to Do:
Find the EBDAT Breakeven Point (review what constitutes a cash fixed cost) Statement of Cash Flows (including operating, investing, and financing) Calculate Cash Build and Cash Burn
Common Size Income Statement (sales as base) and Balance Sheet (total assets as base) Calculate the Cash Conversion Cycle (C3)
Calculate ALL ratios
Analyze Financial Statements
o In order to do this, I would review every example from class and understand how to recognize strengths and weaknesses in financial statements. Our professor indicated that practice makes perfect and there is no one single right answer (although there are multiple wrongs ones), therefore you should consider
Don't forget about the age old question of What type of chemical bond is a molecule?
practicing over and over again until you feel like you completely understand the material.
Tips for the Exam:
Do not blindly assume there is too much inventory
Make sure to connect the findings in each part of the financial statements to fully understand what they tell us.
Consider making a note by each step as to what you find interesting (i.e. if they ran out of a ton of cash or expenses went up dramatically), and that will
help you bring everything together for the analysis section. PRACTICE, PRACTICE, PRACTICE o Not all financial statements on the test will be the same. Some will not have depreciation, some will not have
inventories, therefore you need to understand what parts
of the statements are included in each step because you cannot simply memorize each line, since they change.
The exam will include multiple “whatif” questions. For example, he could ask “what if inventory did not change” or “what if a dividend was not paid.” Then you will need to look at your financial statements and ratios to see what effect those things would have on the company.
It is my understanding that there will be no partial credit for the exam. Although this is harsh, there are numerous ways to check yourself throughout the process so make sure you are double checking your calculations and being very careful throughout the entire exam. Don't forget about the age old question of what is the connection between connection between harm and porn?
We also discuss several other topics like what is catholic?
If you want to learn more check out What is a movement?
If you want to learn more check out What is a meaning of the word symptom?
If you want to learn more check out What is Social Deviance?
Bring a calculator.
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