1.What might be a reason a firm has negative net earnings and positive cash flow?

a.It is not possible.

b.It may have high depreciation and amortization.

c.It may be subject to high tax brackets.

d.It may be reaching the break-even point.

2.Which one of the below is not a component of due diligence?

a.Management test

b.Market test

c.Strategy test

d.Competition test

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3.Which one of the below is true for investment milestones and valuation milestones on a term sheet? a. Valuation milestones allow an investor to postpone payments until the milestone is

reached.

b.Investment milestones allows for reallocation of company ownership.

c.Ownership reallocation following milestones can only be negative (decreased value).

d.If a milestone is not reached, investor can postpone both initial and subsequent payments.

4.Which one of the below has priority over the others following a business liquidation?

a.Employee salary and benefits

b.Court fees

c.Senior debt holders

d.Subordinated debt holders

5.Which one of the below is not a viable harvesting strategy?

a.Systematic distribution of assets directly to owners

b.Outright sale of the business to employees

c.Public equity registration and sale

d.Involuntary bankruptcy

6.What is insolvency?

a.No assets

b.Zero valuation

c.Negative book equity

d.Zero accounts receivable

7.Which one of the below is not a turnaround opportunity?

a.Private liquidation

b.Asset restructuring

c.Operations restructuring

d.Financial restructuring

8.Which one of the below scenarios may require systematic liquidation?

a.Dynamic industry, immediate profit, average growth trajectory

b.Declining industry, immediate profit, no growth trajectory

c.Stable industry, no immediate profit, high-growth trajectory

d.Declining industry, no immediate profit, no growth trajectory

9.Which one of the below defines financial distress?

a.Having insufficient equity to cover short-term debts

b.Starting up a new business within an existing corporation

c.Financing a loan

d.Having insufficient cash flow to meet current debt obligations

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10.Which one of the below is true for business angels and venture capitalists? a. Venture capitalists provide informal forms of investment.

b. Business angels only have a portfolio approach to investments. c. Venture capitalists are self-made entrepreneurs.

d. Business angels typically invest on personal interest and previous experience.

11.What is the importance of liquidity for new ventures?

a.If a business does not have sufficient liquidity it will not be able to complete the cash flow cycle.

b.If a business does not have sufficient liquidity it will not be able to pay off short-term creditors on time.

c.If a business does not have sufficient liquidity it will not be able to reach break-even point.

d.Liquidity is not relevant for new ventures.

12.If you are valuing a private social-media firm, which one of the below valuation methods would not be appropriate?

a.Multiples of cash flow

b.Multiples of unique monthly visitors

c.Price per earnings

d.Multiples of gross margin

13.Which one of the below is not a viable cash management strategy?

a.Shortening cash conversion cycle

b.Optimizing financial functions

c.Implementing more flexible invoice payment terms for customers

d.Implementing cash flow reporting systems

14.Which one of the below is not a best practice for improving accounts payable performance?

a.Adopting more robust governance practices

b.Centralizing accounts payable processing

c.Shortening purchasing approval processes

d.Decreasing supplier vetting

15.Which one of the below defines gross profit margin?

a.It is used to determine how much profit is generated by each dollar in net sales.

b.It is used to determine how much each dollar of sales generates in operating income.

c.It provides us with how much the firm earned on each dollar in sales after paying all

obligations including interest and taxes. d. None of the above.

16.What is the difference between classified and comparative balance sheets? a. They distinguish between cash and non-cash revenue.

b. They distinguish between current and long-term assets and liabilities. c. They distinguish between gross and net profit margins.

d. None of the above.

17.Which one of the below is not an income statement section?

a.Operating income

b.COGS

c.Current assets

d.Gross sales

18.Which one of the below is not a cash flow statement section?

a.Depreciation

b.Amortization

c.Shareholders' equity

d.Net working capital

19.Which one of the below defines gross profit margin?

a.It is used to determine how much profit is generated by each dollar in net sales.

b.It is used to determine how much each dollar of sales generates in operating income.

c.It provides us with how much the firm earned on each dollar in sales after paying all obligations including interest and taxes.

d.None of the above.

20.When does a company burn cash?

a.When the total value of current assets is greater than the total value of current liabilities.

b.When sum of cash flows from operations and investing is negative.

c.When COGS is greater than net income.

d.When the gap between accounts receivable and accounts payable is less than 5 days.

21.Which one of the below is not true for firm growth?

a.Growth is always profitable.

b.Growth is a strategic decision.

c.Growth may occur at the expense of margins.

d.Companies at growth stage may be losing money.