Which of the following is an example of a market risk for a company that manufactures automobiles?

• a) Being suddenly unable to source a critical component of the automobile
• b) Damage to completed cars being transported to a buyer
• c) A competitor that offers a similar line of cars with comparable quality at lower prices
• d) A failure in the company's accounts receivable process

A company with a 120-day operating cycle determines its cash conversion cycle using the following data:

• Receivable days: 35
• Inventory days: 95
• Payable days: 45

What is the company's cash conversion cycle?

• a) 25
• b) 75
• c) 165
• d) 105

When performing capital budgeting, __________ incurred by a project are irrelevant to future investment decisions.

• a) sunk costs
• b) taxes
• c) opportunity costs
• d) depreciation

When managing its cash, a company should make use of float to __________.

• a) make payments before they come due
• b) increase the length of the disbursement cycle
• c) set aside cash for future payments
• d) decrease the length of time for a payment to clear the bank

Which of the following is an advantage of venture capital?

• a) Venture capital investments typically carry a small amount of risk and generate small to moderate returns.
• b) New companies can access large amounts of upfront capital that does not have to be repaid, as a loan would be.
• c) Venture capital is typically easy to secure even with the most basic of business plans.
• d) There are no upfront costs to a company seeking venture capital funding.

Which of the following is a goal of working capital management?

• a) To minimize liquidity and maximize profitability
• b) To eliminate the risk of customers defaulting on credit
• c) To make long-term capital investment decisions
• d) To balance the cash conversion cycle against maximum revenue

An auto manufacturing company is preparing a capital budget and considering four long-term investments. The net present value of each project is as follows:

• Project A: 0.25
• Project B: 0
• Project C: -0.5
• Project D: 1.5

In theory, which two projects should the company pursue?

• a) Projects B and C
• b) Projects A and D
• c) Projects B and D
• d) Projects A and B