1.     Operating cash flow is generated by a company’s daily operations related to production and sales of goods and/or services.

a.     True

b.     False

2.     In general, the reduction of an asset is a source of funds.

a.     True

b.     False

3.  

4.     The cash conversion cycle is calculated as:

a.     Days in Inventory + Collection Period

b.     Days in Inventory – Payables Period

c.     Days in Inventory + Collection Period – Payables Period

d.     None of the above

5.     A company can shorten its cash cycle by:

a.     Reducing inventory turnover

b.     Reducing account payables

c.     Reducing days receivable

d.     None of the above

6.     A company has a retention rate of 50%, sales of $25,000, beginning equity of $50,000 and profit margins of 10%, an asset turnover ratio of .75 and debt of $10,000. What is its sustainable growth rate?

a.     2.5%

b.     1.7%

c.     3.75%

d.     Not enough information given

7.     Scenario analysis is a way of testing forecasts by changing one assumption at a time.

a.     True

b.     False

8.  

9.     Which of the following is commonly used in preparing pro forma statements:

a.     Historical financial statements

b.     Projected sales

c.     Efficiency ratios

d.     All of the above

10.  Pro forma statements are:

a.     Summaries of historical financial statements

b.     Government-mandated analyses of financial statements

c.     Projected statements used in financial planning

d.     Estimated tax liabilities

11.  Which of the following liabilities form part of a company’s “real” activities?

                                               i.          I. Short-term debt

                                             ii.          II. Accounts payable

                                            iii.          III. Accrued operating expenses

                                            iv.          IV. Long-term debt

b.     III only

c.     II and III

d.     I and IV

e.     I only

12.  The cost of debt is generally lower than the cost of equity.

a.     True

b.     False

13.  M&M’s Proposition I states that a company’s value is independent of its capital structure.

a.     True

b.     False

14.  A higher level of leverage generally reduces managerial discretion.

a.     True

b.     False

15.  The Pecking Order Theory of capital structure implies a unique optimum capital structure.

a.     True

b.     False

16.  As EBIT drops, the return on equity (ROE) of a levered firm drops ______ the ROE of an otherwise identical unlevered firm.

a.     the same as

b.     relatively more than

c.     relatively less than

d.     more or less than (it cannot be determined)

17.  The owner of Grandma’s Applesauce is planning to retire after the coming year. She has to repay a loan $50,000 plus 8 percent interest and must rely on cash flow from operations to do so. Cash flow from operations is uncertain; there is a 70% probability it will equal $65,000, and a 30% probability it will equal $45,000. Assuming a tax rate of 0%, what is the owner’s expected cash flow after debt service?

a.     $9,000

b.     $5,000

c.     $11,000

d.     $7,700

18.  Shareholders prefer high risk projects when facing a high probability of bankruptcy because

a.     High risk projects usually bring high rewards.

b.     Shareholders have the residual claim on a company.

c.     Creditors have the residual claim on a company, and therefore bear the risk.

d.     There is a good chance the government will rescue them in bankruptcy.

19.  The _________ states that the value of the firm is determined solely by the value of its assets.

a.     Static Tradeoff Model

b.     M&M proposition I

c.     The Pecking Order Model

d.     Agency Theory

20.  Which of the following expresses the value of a levered firm (VL) in the Static Tradeoff model of optimal capital structure? [Note: VU denotes the value of the unlevered firm; CFD denotes expected costs of financial distress; and PV denotes present value.]

a.     VL = PV(Tax Shield) – PV(CFD)

b.     VL = VU + PV(Tax Shield) / PV(CFD)

c.     VL = VU + PV(Tax Shield) – PV(CFD)

d.     VL = VU + PV(Tax Shield)

21.  A example of indirect costs of bankruptcy is

a.     Court costs

b.     Attorney and advisor fees

c.     Lost sales due to costumers and suppliers lost trust

d.     All of the above

22.  Which of the following are equivalent under M&M proposition I?

a.     Maximizing firm value and maximizing firm profit

b.     Maximizing firm value and minimizing the cost of capital

c.     Minimizing firm’s cost of capital and minimizing firm’s debt burden

d.     Maximizing profit and minimizing taxes

Punctual Essays
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Reviews

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Reviews

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.