1. Parsons and Associates is a highly-regarded business financial advisory firm located in a downtown office building that was founded thirty-five years ago by Grant Parsons. Your bank has a long-term relationship with both the business and its founder. You recently saw Grant Parsons at a bank-sponsored economic outlook forum and he suggested you stop by his office to discuss some potential opportunity. Based on the type of company and life cycle stage, which of the following do you think is the most likely opportunity to be discussed?

A. A mortgage to fund the purchase a new building.

B. A line of credit to fund a seasonal buildup in receivables.

C. A term loan to fund the buyout of his interest by his partners.

D. A new loan to refinance his home mortgage.

2. Which of the following statements best describes the relationship between product and industry lifecycle stages?

A. A products lifecycle stage by definition coincides with its industrys lifecycle stage.

B. Product lifecycle stages generally lag their industry by one stage.

C. Product lifecycle stages generally lead their industry by one stage.

D. Individual products can be variable in their lifecycle timing compared to the overall industry stage

3. As the credit analyst of Your Bank, you have been asked to assess the liquidity of Burgess Corporation, a distributor of office supplies. Which of the following measures would provide the most accurate measure of liquidity?

A. Net working capital

B. Quick ratio

C. Current ratio

D. Working capital/sales

4. FAR Corporation imports high quality chocolate, distributing to large regional candy makers as the primary ingredient in their branded chocolate confections. The company purchases from five sources. Two of the sources are in a country that recently erupted into what is believed will be lengthy and violent political turmoil. High quality chocolate is now in short supply, and FAR has been unable to secure acceptably priced replacement suppliers for about 23% of its needs, because the worlds candy and food giants have pre-existing contingency contracts that guarantee access to chocolate during a serious supply disruption. FAR does not have comparable contingency arrangements.

Assume you are developing a financial projection for the next twelve months. To date, FAR has been very profitable and has very positive cash flow. Which of the following projection variables are most critical to use in a sensitivity analysis that tests the companys continued ability to generate cash flow needed to service term debt?

A. Sales growth % and gross profit margin.

B. Gross profit margin and inventory days.

C. Sales growth % and inventory days.

D. Gross profit margin and receivable days.

5. A company with current-year sales of $4,500,000 and cost of goods sold of $3,248,000 reduced its inventory days from 119 days in the prior year to 115 days for the current year. Its receivable days slowed from 40 days to 43 days. What was the cash flow effect of these swing-factor efficiency changes?

A. No cash flow effect

B. ($1,000)

C. $9,000

D. $12,000

6. GCC, Inc. is a local firm that provides general contracting services to commercial real estate developers operating in your region. In assessing the sustainability of the companys revenues, which of the following questions would be least relevant to ask?

A. What is your current backlog of contracts?

B. How many developers do you work with?

C. What is the outlook for the economy in the region?

D. How much did your sales grow last year?

7. Using the information below, which statement best describes how ABC met its predominant financing need?

ABC Company Partial Direct Cash Flow Statement
Sales	100,000
Change in accounts receivable	-2,000
Cost of goods sold	-75,000
Change in inventory	-3,500
Change in accounts payable	3,000
Operating expenses	-19,000
Changes in accruals & other	2,000
Taxes paid	1,500
Interest expense	-3,500
Dividends	-500
Current maturities	-----
Capital expenditures	-23,000
Change in short-term debt	3,500
Change in long-term debt	13,000
Change in equity	-----

A. ABCs operating cash flow was sufficient to cover its investing activities.

B. ABC needed to use short-term debt to support the growth in receivables and inventory.

C. ABCs capital expenditures were funded mostly by long-term debt.

D. ABC used short-term debt to cover a portion of its interest expense.

8. The Conference Boards Report of Economic Indicators recently published the following report:

The Conference Board announced today that interest rates remain low. Reports indicate that companies are holding lower inventories and capital expenditures have decreased. The availability of credit continues to be tight.

Based on the above report, which of the following best describes the current stage in the general business cycle?

A. Early expansion

B. Late expansion

C. Early contraction

D. Late contraction

9. You are calling for the first time on the owner of a successful local business that currently banks with another bank in your market. You are very interested in developing a banking relationship with the business and its owner. Which of the following goals will be most important to achieve in the initial meeting?

A. Obtain a commitment from the owner to open a checking account at your bank.

B. Offer a term sheet outlining a loan at a competitive rate.

C. Learn about the owners business and personal objectives.

D. Gather the most recent financial statements on the business.

10. Collective Arts and Crafts is a retailer that features the work of many local artisans. In developing questions to learn about the companys expense structure, which of the following would be most relevant to ask?

A. Is any of your inventory sold on consignment?

B. How many suppliers do you have?

C. How is your sales staff compensated?

D. Do you own your retail location?