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1.
Which expenses are not subtracted from sales when calculating NOPAT (net operating profit, after taxes)?
Interest. Interest expenses are not subtracted from operating profit when calculating NOPAT. Taxes (the "AT" in NOPAT) obviously are, while COGS are subtracted from sales to get to operating profit.
2.
When using net profit margin to look at the relative efficiency of companies, it is best to use it _______.
Within the same industry. It is best to use both net profit margin and turnover in isolation only if looking at very similar companies.
3.
Which of the following measures will not affect return on assets (ROA)?
Asset/equity ratio. The asset/equity ratio will affect return on equity (ROE), not ROA.
4.
If a company's ROIC (return on invested capital) exceeds _______ for a several years, it most likely has an economic moat.
15%. Provided that it occurs for a number of years, this figure suggests a moat.
5.
You've probably discovered a good cash machine if a company's free cash flow is more than _______ of sales.
5%. Five percent is generally accepted, though you should investigate the company further.
