Which one of the below is a source of cash inflow?

a.Payroll

b.Loan payments

c.Investments

d.Taxes

Why can inventory drain company's cash?

a.It ties cash at a zero rate of return.

b.It requires storage space.

c.It requires constant monitoring.

d.It shortens cash flow cycle.

24.How can you reduce cash gap?

a.Increase inventory turnover

b.Increase days payable

c.Decrease days receivable

d.All of the above

24.Which one of the below is not true for fixed and variable expenses?

a.Businesses have control over variable expenses.

b.Fixed expenses are operating expenses.

c.Variable expenses are related to cost of goods sold.

d.Fixed expenses are always greater than variable expenses.

24.Which one of the below is not true for liquidity?

a.It is a measure of how fast current cash can be converted into assets.

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

c.Liquidity affects the business' credit rating and ability to borrow funds

d.It is an important predictor of survival and longer-term growth.

24.Why might a company have a high current ratio but a low quick ratio (acid test ratio)?

a.Ineffective accounts receivable practices

b.Cash burn

c.Over-investment in inventory

d.Ineffective production

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30. Why are fixed assets carried on the balance sheet at a price that may not reflect the true value of the assets?

a.True value of assets should also include tax expenses and they are not included in balance sheet calculations.

b.Balance sheets only include current assets, long term assets are not included.

c.The balance sheet reflects the historical costs of assets and includes depreciation for fixed assets, they are not adjusted for actual market conditions.

d.True (market) value accounts for competition, it is not included in balance sheet calculations.

31.Which one of the below is true for financial statement ratio analyses?

a.Profitability ratios are used to measure the ability of the firm to meet its short-term creditors' claims.

b.Market ratios are used to determine how well a company is managing its assets and if the assets are being used at the optimum level.

c.Leverage ratios indicate how much of the company's net worth and asset commitment is being financed with debt (sources of funds obtained from creditors).

d.Liquidity ratios determine how well the firm is using its assets and sales revenue to generate a positive return for its owners.

32.If a company has $181,000 in total liabilities and $225,000 in total assets, what percentage of total assets is being financed with the use of other people's money?

a.80%

b.20%

c.18.1%

d.22.5%

33.Which one of the below is true for gross profit margin?

a.It shows the return of investment on each dollar of asset investment.

b.It shows how much the firm earned on each dollar in sales after paying all

obligations including interest and taxes.

c.It shows how much each dollar of sales generates in operating income.

d.It shows how much profit is generated by each dollar in net sales.

34.Which one of the below is true for gross working capital?

a.Gross working capital consists of the current assets of the firm.

b.Gross working capital is the difference between accounts receivable and accounts payable in any given time.

c.Gross working capital is the difference between a business' total current assets and its total current liabilities.

d.Gross working capital is the difference between revenue and COGS.

35. What is maturity premium for cost of financial capital?

a.Premium one would face in the absent of inflation, illiquidity and other external factors

b.Premium required to compensate the lender for the probability that a borrower will stop making payments

c.Premium charged when a debt instrument cannot be converted to cash quickly at its existing value

d.Premium that reflects increased uncertainty associated with long-term debt

36.Which component of cost of capital is intended to compensate the lender for the probability that a borrower will stop making payments?

a.Real interest rate

b.Inflation premium

c.Default risk premium

d.Liquidity premium

37.Which one of the below types of debt has a priority when a business dissolve?

a.Senior debt

b.Subordinated debt

c.Long-term debt

d.Short-term debt

38.Which one of the below is true for debt recollection following business dissolutions?

a.Holders of senior debt have top priority over all other debt and equity providers

b.Equity holders have priority over subordinated debt providers

c.Senior debt holders cannot take their money until equity holders approve distribution

of business assets

d. Commercial lenders have priority over individual lenders

39. Which one of the below investors can only invest $1 million equity capital or less in a business?

a.John Doe who has an individual net worth of $1 million.

b.Sally Mae who has an individual annual income of $120,000 in the last year.

c.John Doe who has a combined net worth of $1.5 million with his spouse.

d.Sally Mae who has a combined annual income of $350,000 with her spouse in the last year.

40.Which one of the below companies would not be an ideal candidate for private equity?

a.A hyper-growth (annual growth rate over 20%) firm

b.A firm with products that have short sales cycles

c.A firm with high-risk (more than 25% risk of failure) products

d.A firm with 55% gross margins in an industry that has 35% average gross margin

41. If you are forecasting 45% IRR in the next five years for a private equity investment, which one of the below investors would be more interested in your company?

a.Corporate finance investors

b.Mezzanine funds investors

c.Venture capitalists

d.None of the above