1. Which of the following can be considered signs of value destruction in a business? a. Acquisition addiction b. Steady or increasing ROE c. Market Leadership d. Attractive valuation ratios 2. What kind of information is providing to us the Cash Flow statement? a. None of the previous is correct b. It details the net profit plus all the non-cash operations included in the financial statements c. It details de cash flow generated from the firm's operations, investments, and financial activities d. It details de net profit plus all the capital expenditures 3. Which can be positive rules of thumb when analyzing a business project? a. Return on Equity around 10% and Price Earnings ratio of 20, Debt to Asset ratio of 30% b. Return on Equity bigger than 15% and Price Earnings ratio of 10, Debt to Asset ratio of 30% c. Return on Equity bigger than 20% and Price Earnings ratio of 20, Debt to Asset ratio of 60% d. Return on Equity bigger than 20% and Price Earnings ratio of 40, Debt to Asset ratio of 60% 4. How can Enterprise Value be defined? a. Enterprise value is a measure of the company's value. It can be calculated as Shareholders' Equity plus Long Term Financial Debt less Cash at Banks b. Enterprise value is a measure of the company's value. It can be calculated as Shareholders' Equity plus Short Financial Debt plus Long Term Financial Debt less Cash at Banks c. Enterprise value is a measure of the company's value. It can be calculated as Shareholders' Equity plus Long Term Financial Debt plus Cash at Banks. d. Enterprise value is a measure of the company's value. It can be calculated as Shareholders' Equity plus Short Term Financial Debt plus Long Term Financial Debt 5. What are characteristics of Cost Accounting? a. They inform us about the production costs incurred by the company. It calculates the costs at every stage of the production process. Cost accounting is not mandatory. b. They inform us about the production costs incurred by the company. It calculates the costs at every stage of the production process. All companies must generate their cost accounting statements. C. All the previous statements are correct d. They inform us about the global nature of the company. It calculates the costs at every stage of the production process. All companies must generate their cost accounting statements. 6. What definition is appropriate for a FIFO inventory accounting? a. It considers the average price of the units arrived b. It considers the last unit arriving in inventory as the first one sold c. It considers the first unit arrived in inventory as the last one sold d. It considers the first nit arrived in inventory as the first one sold 7. What is the meaning of self-financing capacity in a company? a. Self-financing is the capacity of the company to finance its operations through their normal activities, including loans or financial debt b. Self-financing is the capacity of the company to finance its operations through their normal activities, without using loans or financial debt C. All the previous statements are correct d. Self-financing is the capacity of the company to finance its operations through their normal activities and any other extraordinary activity. 8. How can we define break-even level for a company? a. The break-even point is the minimum level of revenues at which the company is not making a profit, not a loss. In the calculation we consider fixed costs, variable costs and number of units sold. b. The break-even point is the minimum level of revenues at which the company is not making a profit, not a loss. In the calculation we consider Sales, fixed costs and number of units sold. C. The break-even point is the minimum level of revenues at which the company is not making a profit, not a loss. In the calculation we consider Sales, fixed costs, variable costs and number of units sold. d. The break-even point is the minimum level of revenues at which the company is not making a profit, not a loss. In the calculation we consider Sales, fixed costs and variable costs. 9. How can we increase the Economic Value Added in a company? EVA as measure of the value creation of a business during a certain time period is equal to EBITDA less the multiplication of the Average Cost of Liabilities by Assets. a. By decreasing assets and reducing the average cost of liabilities b. All the previous answers are correct c. By increasing EBITDA at the same rate as Cost of Liabilities and Assets d. By increasing the cost of liabilities and increasing the assets 10. Which of the following is considered a profitability measure? a. Price-earnings ratio b. Return on Assets c. Fixed asset turnover d. Days sales in inventory 11. Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4. From this we know that a. Firm A has a higher equity multiplier than firm B b. Firm A has a higher profit margin than firm B c. You need more information to say anything about the firm's profit margin d. Firm B has a higher profit margin than firm A e. Firm A and B have the same profit margin 12. To measure a firm's solvency as completely as possible, we need to consider a. The firm's capital structure and the liquidity of its current assets b. The firm's relative proportion of debt and equity in its capital structure c. The firms leverage and its ability to make interest payments on its long-term debt d. The firm leverage and its ability to turn its assets over into sales e. The firm's ability to use Net Working Capital to pay off its current liabilities 13. A company wants to determine the cost of equity to use in the calculation of its weighted average cost of capital. The CFO has gathered the following information: - Rate of return on 3-month Treasury bills 3.0% - Rate of return on 10-year Treasury bonds 3.5% - Market equity risk premium 6.0% - The company's estimated beta 1.6 - The company's after-tax cost of debt 8.0% - Risk premium of equity over debt 4.0% - Corporate tax rate 35% Using the bond-yield-plus-risk-premium approach, the cost of equity for the company is closest to: a. 9.90%. b. 12.60%. c. 9.40% d. 13.10%. ......... value of free cash flows. 14. The estimated fair value of an asset is based on the a. Future b. Current c. None of these d. Discounted 15. Business valuation is also known as a. All the above are correct b. Business sales history C. Business appraisal d. Comparative value 16. There are several fundamental business valuation approaches, one of which is a. Investment b. Fair value c. Liquidation Value d. Income Approach 17. How can we calculate the working capital in a company? a. Accounts Receivable less Accounts Payable b. Cash at Banks plus Accounts Receivables less Accounts Payable plus Short-Term Debt C. Current Assets less Current Liabilities d. Cash at Banks plus Accounts Receivable less Accounts Payable 18. Which of the following methods could be identified as based on multiples? a. Dividend discount b. Sales ratio C. None of the previous d. Liquidation Method 19. What can be considered advantages of the discounted cash flow models? a. It takes into consideration all future business decisions b. It compares easily with other companies in the same sector of activity c. It approaches to the current real value of the corporation d. It is based on past account futures not on future cash flows 20. The Strategic Plan can be defined as: a. Time horizon over 1-year, high predictability, low complexity, involves top management b. Time horizon over 1-year, low predictability, High complexity, involves top management c. Time horizon over 1-year, low predictability, medium complexity, involves top management and the totality of the organization d. Time horizon over 1-year, low predictability, High complexity, involves management at top and operating divisions