Principles of Finance DSST

Discussion in 'CLEP, DANTES, and Other Exams for Credit' started by MISin08, Feb 25, 2010.

  1. MISin08

    MISin08 New Member

    I took the paper version today. This was the hardest test prep I have done yet, and the exam kicked me in the head and the other end too. Also the hardest time I have ever had liking a subject, the first test I have ever studied for and had no desire whatsoever to take more classes in the field. Finance is, however, crucial, I am under-educated in it (in big organizations we are insulated from the fundamentals) and I hope to rise to positions where knowing it is of value. I have also just about ruled out a MBA for the foreseeable future, so this is my chance. I came very close to taking Finance as a class but I decided "as long as it has 'principles of' in the course title testing is fair game". I hope I don’t live to regret that! Seriously, I was pretty confident of a pass or I would have re-scheduled. I am not confident of a high score. I need to move on, though, so I am taking whatever I get. Operations Management here I come.

    I took a similar approach as my strategy for Ethics in America, that is, studying less intensively for longer, and that was good, but I did not anticipate catching a cold and having my boss visit from out of town in the last two weeks before the exam. The last two weeks are usually vital to wrapping up (studying forum feedback, taking practice tests), then I typically spend the weekend before the test relaxing. Not this time.

    I used a pdf of an old edition of the recommended text by Ross, Barron's Finance when I wanted to read the material explained differently, InstantCert, Investopedia, a study book downloaded from Lots of reading, note-taking, and re-writing my notes into a OneNote notebook to create a study guide. Note cards. The 'Snazzlefrag' study guide floating around the Web. I did problems by hand and with the calculator.

    Ross has everything in the exam and then some. Its companion site has 3 quizzes per chapter, which helps make up for the lack of a Peterson practice test. The trick is knowing what to focus on and what to leave out, as some of the chapters not tested (long-term planning, for example) are helpful to understanding others (capital budgeting) that are, but you don't need to study them as closely. If I had it to do again I would have written out a study outline cross-referenced to the book. I don't usually do this anymore because a physical book lends itself to marking your place, but the e-book lacks tangible navigational cues. Lesson learned there.

    I also spent way too much time on TVM considering how easy the calculator makes it. I should have got the calculator earlier before struggling with it in the book. I got a lot about using the calculator at this site.

    Some things to be sure you know:
    • Cost of retained earnings -- not just what it is, but how to calculate it from given values, the values given assume you know how other financial factors affect retained earnings
    • Effect of inflation on risk under the CAPM
    • Effects of differing levels of risk aversion on securities risk rating; calculate beta from given values
    • Yield to maturity on bond given values -- I could not remember how to work the function on my calculator
    • Several PV, NPV and one IRR calculation question
    • The 'family finances car' PV question
    • Calculating retained earnings from an income statement
    • Remember the accounting equation
    • Current ratio, practically the same question 3 times
    • Know the implications of/effects on SML (which is CAPM)
    • Which activities increase cash?
    • No EOQ
    • No inventory calculations, but know that inventory is least liquid current asset
    • If a business has a lot of assets in slow-moving inventory, which measure is the best indicator of their situation?
    • One where cost of equity /cost of capital is supposed to be a guide to return on assets. There's a relationship here I'm clueless about.
    • Which measure is best to determine return on assets (ROA is not one of the choices)?
    • Pick which of the following is characteristic of common stock
    • Know the definition of net present value, as well as how to figure it.
    • No questions about horizontal or vertical analysis or benchmarks, or common-size statements
    • Beta on portfolio given betas of stocks in it
    • How would a firm minimize exchange rate risk?
    • What is a spot rate trade? None of the given answers made sense. I chose the one that looked like a typo of a sensible answer
    • No questions on DuPont directly, but one that looked like it may have assumed knowledge of it.
    • Calculate EPS (a 'what to leave out' question)
    • Several stock questions are used to test your knowledge of related topics; this makes stocks seem over-represented on the test.
    • No tables in the booklet, but the staff were fine with my BAII Pro (and a good thing too, or I would slink off in embarrassment and just take the class w/o waiting for my score)

    I would be sure you have the economics and accounting subjects down cold. They are the prequel; Finance is your masterwork.

    Unless something wonky comes up in my final evaluation this is my last exam for my BS. I won't know my score for a few weeks.

  2. chitchat

    chitchat New Member

    Wow! Thank you for taking the time to post such valuable information on Principles of Finance. If there were a template on reviewing one's experience with a test, you nailed it, Phillip. This test is a tough one and we (future test takers) need all the help we can get.

    Congrats on your degree!

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