medium · Corporate Credit Analysis fsa
AlphaCorp and BetaCorp both report Net Income of $200M. AlphaCorp shows Cash from Operations (CFO) of $120M with $70M in non-cash working capital absorption. BetaCorp shows CFO of $230M with $20M in working capital release.
Which firm exhibits higher quality of earnings?
- Both have equal quality because Net Income is identical
- AlphaCorp, because its accruals indicate future revenue realizations
- AlphaCorp, because the investment in working capital suggests growth
- BetaCorp, because its earnings are fully backed by cash generation
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More Corporate Credit Analysis fsa practice
- What is the company's Funds From Operations (FFO)?
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- What is the company's Free Operating Cash Flow (FOCF)?
- What is the company's Current Ratio?
- What is the most likely credit implication?
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- For every 1.00 in new revenue, how much additional cash must the firm 'invest' in working