Wall Street Prep Financial Modeling Exam Questions And Answers 100% Correct |

Cash from investing activities {Ans: cash related to investments in the business (additional capex or sales of assets) for stable, mature, plain vanilla a negative cash flow from investing activities is desirable as this indicates that the company is trying to grow by buying assets}Is it possible for a company to show positive cash flows but be in grave trouble? {Ans: Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves lack of revenues going forward.in the pipeline}If I issue $100mm of debt and use that to buy new machinery for $50mm, walk me through what happens in the financial statements when the company first buys the machinery and in year 1. Assume 5% annual interest rate on debt, no principal pay down for the 1st year, straight-line depreciation, useful life of 5 years, and no residual value. {Ans: If the company issues $100mm of debt, assets (cash) goes up by $100mm and liabilities (debt) goes up by $100mm. Since the company is using some of the proceeds to buy machinery, there is actually a second transaction that will not affect the total amount of