Bio 437

Consignment Sale

Turnover physical possession without turning over possession

According to the BLS, U.S unemployment just prior to the 2020 Lockdown was ____ and in the latest report, it was _____. a) 3.5% and 3.7%. b) 4.6% and 4.6%. c) 16.6% and 12.5%. d) 2.5% and 5.5%. e) 5.3% and 2.5%

a) 3.5% and 3.7%.

At the end of 2021, the Dow Jones Industrial Average was closest to a) 36,000. b) 3,600. c) 360. d) 36. e)$50 per barrel.

a) 36,000

At the end of 2021, the Dow Jones Industrial Average was closest to a) 36,000. b) 3,600. c) 360. d) 36. e) $50 per barrel.

a) 36,000.

R(j) = Rf + Beta(j) (Rm - Rf) is the a) CAPM. b) WACC. c) DuPont Formula. d) The market risk premium. e) IRR.

a) CAPM.

According to the text, compiled financial statements a) Don't have to use GAAP. b) Have inventory confirmed. c) Have A/R confirmed. d) Have A/P confirmed. e) b, c & d.

a) Don't have to use GAAP.

All else equal, based on priority in bankruptcy, which is the least risky? a) Junk bonds. b) Cumulative preferred. c) Common stock. d) Senior preferred equity. e) Stock options.

a) Junk bonds.

According to the text, for manufacturing and distribution companies, what is the most popular means of managing their Income Statement? a) Manipulating inventory valuation. b) Using reviewed statements. c) Abusing Reg. D. d) Misapplying Rule 504 or 506. e) c&d.

a) Manipulating inventory valuation.

Purchase of stock acquisitions a) allow sellers to pay taxes at capital gains rates. b) exposes sellers to depreciation recapture tax. c) protects buyers from contingent liabilities. d) all of the above. e) none of the above

a) allow sellers to pay taxes at capital gains rates.

Zero coupon bonds a) do not have a cash interest payment. b) have warrants. c) are zero risk. d) all of the above. e) none of the above.

a) do not have a cash interest payment.

High levels of asymmetric information between investors and entrepreneurs a) helps to explain Kleiner's Law. b) is not a problem for entrepreneurs. c) shows that diffusion is not interrelatedness. d) reduce the need for sinking funds. e) all of the above.

a) helps to explain Kleiner's Law.

At the beginning of 2022, the target Fed funds rate was a) 30-day LIBOR + 225 bp. b) 0.00 to 0.25%. c) 4.75 to 5.00%. d) 2%. e) 5.00 to 5.25%.

b) 0.00 to 0.25%.

For at least 5 years, the Federal Reserve's goal for inflation per year has been a) 1%. b) 2%. c) 3%. d) 4%. e)None of the above are within one percentage point.

b) 2%.

In the Stancill text, the decision to grant credit at the margin can be estimated as a) P(C) > (1-P)(G). b) P(G) > (1-P)(C). c) P*Q > P*C. d) NOCF" <NOCF'. e) NOCF" >0.

b) P(G) > (1-P)(C).

Which of these SEC Rules was repealed in 2017? a) Rule 504. b) Rule 505. c) Rule 506. d) Rule 405 e) Rule 605

b) Rule 505.

What are the first three lines in Stancill's cash flow statement? a) Net Income + Depreciation - Changes in balance sheet accounts. b) Sales + Other Income - Change in A/R. c) Net Income + Sales + Depreciation. d) Sales - Costs - Expenses. e)None of the above.

b) Sales + Other Income - Change in A/R.

Why might an entrepreneur trade lower fixed costs for higher variable costs where total costs don't change for expected production? a) She wishes to increase her leverage. b) She wishes to lower her breakeven point. c) She wishes to grow faster. d) (X - E)/S > Y. e)ROA>ROE.

b) She wishes to lower her breakeven point

Business Opportunity Brokers a) Do the largest M&A deals. b) Specialize in selling Mom and Pop businesses. c) Specialize in functionally managed firms. d) All the above. e) none of the above.

b) Specialize in selling Mom and Pop businesses.

According to the text, why might an entrepreneur trade lower fixed costs for higher variable costs where total costs don't change for expected production? a) The entrepreneur wants to increase leverage. b) The entrepreneur wants to lower the breakeven point. c) The entrepreneur wants to grow faster. d) (X-E)/S > Y e) All of the above.

b) The entrepreneur wants to lower the breakeven point.

The profitability index is: a) The NPV over the present value of the cash inflows. b) The present value of the cash inflows over the present value of the cash outflows. c) The present value of the cash outflows over the present value of the cash inflows. d) The present value of the cash inflows over the NPV. e)None of the above.

b) The present value of the cash inflows over the present value of the cash outflows.

XYZ Auto's Times Interest Earned ratio is 15 and the auto industry is 5. These facts imply that compared to the typical automaker a) XYZ is less likely to issue additional debt. b) XYZ is less likely to go bankrupt in a recession. c) XYZ is more likely to go bankrupt in a recession. d) XYZ is less likely to build new production plants. e) None of the above.

b) XYZ is less likely to go bankrupt in a recession.

At its recent peak in 2022, the price per barrel of (WTI) crude oil was a) less than $12.00. b) about $120. c) about $45. d) approximately 10 basis points. e) more than $1,000.

b) about $120

S-1 filings a) are used for "$1" million angel or VC equity raises. b) are used for the largest equity offerings. c) do not require SEC review at $1 million or below. d) none of the above. e) a & c.

b) are used for the largest equity offerings.

Prudence requires that one expect _________ in all financial transactions and one should be pleasantly surprised when one does not observe _________. a) a high IRR, a positive NPV. b) fraud, fraud. c) a positive NPV, a high IRR also. d) a PPM, an LBO e) cash flow, depreciation.

b) fraud, fraud.

According to Stancill, the most important factor in determining a company's valuation multiple is a) its D/E ratio. b) its industry. c) if it has had a big financial bath. d) its earnings per share. e) None of the above.

b) its industry.

Why do firms go public via the "back door?" a) larger capital raises. b) less SEC review. c) better market maker coverage. d) a and c e) a, b and c.

b) less SEC review.

For the months of September and October 2022, the change in the CPI-U was (seasonally adjusted) a) +1.2%, -0.2 b) +0.8%, +0.9 c) +0.4%, +0.4% d) -0.6%,+ 2.6% e) none of the above are within 0.5%

c) +0.4%, +0.4%

Which item is never in Stancill's Necessary Discretionary? a) R&D. b) Capital Expenditures. c) A/R. d) Preferred Dividends. e) Bonuses.

c) A/R.

In Stancill's cash flow statement, what are the priority outflows? a) Interest Expense + Current Assets. b) Manufacturing Costs + Operating Expenses c) Interest Expense + Current Debt Repayments d) R&D, G&A and Sales and Marketing. e) None of the above.

c) Interest Expense + Current Debt Repayments

Depreciation and rent are both sources of a) Variable costs. b) Non-cash expenses. c) Operating leverage. d) Financial leverage. e)None of the above.

c) Operating leverage.

According to the text, the Percent Required (PR) of stock to be sold to fund a company is estimated by what relationship (equation)? a) PR = Investment / (Return*5th year Net Income * Exit PE). b) PR = 5th year Net Income * Investment / (Return*Exit PE). c) PR = Return * Investment / (Exit PE * 5th year Net Income). d) PR = Investment * Exit PE / (Return*5th year Net Income). e) None of the above.

c) PR = Return * Investment / (Exit PE * 5th year Net Income).

According to the text, which of these statements are true? a) Compiled statements require GAAP. b) Reviewed statements generally cost less than compiled. c) Reviewed statements require GAAP. d) Audited statements cost less than compiled. e) None of the above.

c) Reviewed statements require GAAP.

Assume the central bank has increased interest rates by ¼ point 17 times in the past few years. This action is most likely to cause a) a slowdown in the economy. b) inflation to decline. c) a & b. d) increased new investment by highly leveraged firms. e) an increase in economic activity.

c) a & b

Assume the central bank has increased interest rates by ¼ point 17 times in the past few years. This action is most likely to cause a) a slowdown in the economy. b) inflation to decline. c) a & b. d) increased new investment by highly leveraged firms. e) an increase in economic activity.

c) a & b.

In classic corporate finance, bankruptcy a) is the costless transfer of ownership from equity holders to debt holders. b) courts pay creditors in order of priority. c) a & b. d) increases equity value. e) none of the above.

c) a & b.

Asymmetric information refers to a) a conflict of interest between a principal and an agent. b) an informational problem within government agencies. c) differences in information between buyers and sellers. d) information regarding the asymmetry of inflation and long-term interest rates. e) none of the above.

c) differences in information between buyers and sellers.

Prudence requires that one expect _________ in all financial transactions and one should be pleasantly surprised when one does not observe _________. a) a high IRR, a positive NPV b) a positive NPV, a high IRR also c) fraud, fraud. d) a strong PPM, an LBO e) none of the above.

c) fraud, fraud

According to the text, a shopped deal is a) highly prized. b) a retail venture. c) no deal. d) less risky. e) none of the above.

c) no deal.

According to text, the IRR is the a) rate of return from the CAPM. b) weighted average cost of capital or WACC. c) rate of discount that makes the NPV of the cash flows equal to zero. d) rate of discount that makes the future value of the cash flows equal to zero. e) after-tax cost of debt.

c) rate of discount that makes the NPV of the cash flows equal to zero.

According to the text, what are the ingredients for a startup? a) cash, cash and more cash. b) a great idea and a deep pocket. c) the basic idea, key person, PPM and venture capital. d) venture capital, friends, family and fools. e) a devoted mom and pop.

c) the basic idea, key person, PPM and venture capital

The recent CPI was a) +1.0% for the month of August and over 18% for the previous 12 months. b) +0.2% for the month of August and over 1.8% for the previous 12 months. c) -0.4% for the month of August but over 8% for the previous 12 months. d) +0.1% for the month of August and over 8% for the previous 12 months. e) -0.1% for the month of August but over 15% for the previous 12 months.

d) +0.1% for the month of August and over 8% for the previous 12 months.

At the end of October 2022, the nominal yield on the ten-year Treasury bond was what? a) +1.1% b) +2.1% c) +3.1% d) +4.1. e) +5.1%.

d) +4.1.

According to the text, Mom and Pops are a) the focus of the Sarbanes-Oxley Act. b) examples of mananas. c) often IPOs. d) hard to finance. e) none of the above.

d) +8% for the previous 12 months.

In the BEA estimate, the Q2 and Q3 2022, US GDP real change in percent was closest to a) +6.9, +2.3 b) +3.2, +3.5 c) -1.8, +3.9 d) -0.6, +2.6 e) +2.7, +3.6

d) -0.6, +2.6

What is the range of EBITDA multiples over a business cycle as given in the text? a) 20 to 90 b) 0.2 to 0.9 c) 0.02 to 0.90. d) 2 to 9. e) 200 to 900.

d) 2 to 9.

Annual returns to long-term bonds for many decades have averaged roughly a) 12%. b) 18%. c) 3%. d) 6%. e) 4%.

d) 6%.

According to the text, why consider the cash flows from sets of capital projects instead of taking all positive NPV projects? a) Some sets of investment projects might exceed capital available. b) The entrepreneur cannot easily diversify their holdings. c) Bankruptcy is personally costly to the entrepreneur. d) All the above e)None of the above.

d) All the above

According to the text, why is bankruptcy different in entrepreneurial finance than in classic corporate finance? a) In classic corporate finance, bankruptcy is the costless transfer of ownership from equity holders to debt holders. b) In entrepreneurial finance, bankruptcy is personally costly to the entrepreneur. c) Entrepreneurs lack the ability to diversify their risk. d) All the above. e)None of the above.

d) All the above.

From poor to best, what are the three quality levels of financial statements? a) Reviewed, Audited, Compiled. b) Reviewed, Compiled, Audited. c) Audited, Compiled, Reviewed. d) Compiled, Reviewed, Audited. e) None of the above.

d) Compiled, Reviewed, Audited.

In Stancill's cash flow statements, what are the priority outflows? a) Interest Expense + Current Assets b) Costs + Expenses c) R&D, Marketing & Administration. d) Interest Expense + Current Debt Repayments e)None of the above.

d) Interest Expense + Current Debt Repayments

Days Sales in Inventory a) Measures how well a firm manages its expenses. b) Measures how quickly a firm collects its receivables. c) Measures how well a firm manages its cost of goods. d) Measures how quickly a firm sells its goods. e) None of the above.

d) Measures how quickly a firm sells its goods.

In the text, the maximum amount of debt which is financially viable if dividends are zero is a) NOCF/ERR. b) NPV/IRR. c) D/E * ERR. d) NOCF'' / (i+S.F.). e) NOCF'' - Nec Dec.

d) NOCF'' / (i+S.F.).

According to the text, why consider the time shape of cash flows? a) Some investments are too small. b) The entrepreneur can easily diversify their holdings. c) Bankruptcy is not personally costly to the entrepreneur. d) Too many mananas might kill the company's cash flow. e)None of the above.

d) Too many mananas might kill the company's cash flow.

An Installment Sale occurs when a) You are paid upfront but must deliver services over time. b) You provide something upfront but are paid over time. c) You install a piece of machinery and you are paid when it works. d) a & b. e) b&c.

d) a & b.

The price per oz of gold in mid-September was a) less than $4.95. b) about $17,000. c) less than $500. d) about $1700. e) none are within 20%.

d) about $1700.

In bank financing, signature loans to corporations a) are uncollateralized. b) only go to the most credit worthy clients. c) must be approved by the corporation's board of directors. d) all of the above. e) b & c.

d) all of the above

A PPM a) is also called a "package." b) is a private placement memorandum. c) is used to raise funds for private corporations. d) all of the above. e) none of the above

d) all of the above.

PIK debt a) can be paid with more debt. b) means payment-in-kind debt. c) reduces the risk of bankruptcy, all else equal. d) all of the above. e) none of the above.

d) all of the above.

According to the text, Mom and Pops are a) the focus of the Sarbanes-Oxley Act. b) examples of mananas. c) often IPOs. d) hard to finance. e) none of the above.

d) hard to finance.

The recent change in the CPI was closest to a) +18% for the previous 12 months. b) +5.8% for the previous 12 months. c) -4% for the previous 12 months. d) +8% for the previous 12 months. e) +14% for the previous 12 months.

d) hard to finance.

Valuing inventory at the lower of cost or market results in a) fraud. b) higher costs, higher income, higher equity. c) lower costs, higher income, higher equity. d) proper GAAP financial statements. e)higher costs, lower income, higher equity.

d) proper GAAP financial statements

One year ago, the Fed funds target rate was closest to a) the prime rate. b) 1.75 to 2.00% c) 3 to 3.25% d) 4 to 4.25% e) 0 to 0.25%.

e) 0 to 0.25%.

According to the text, what are the drivers of P/E ratios? a) Product prices and Externalities. b) Products and Employees. c) Production with reduced Emissions. d) Politics and Embezzlements. e)Growth and Profitability.

e) Growth and Profitability.

In Stancill's entrepreneurial capital budgeting model, against what do we plot the coefficient of diffusion for a set? a) X. b) e. c) a+4b+c. d) K. e) R.

e) R

According to the text, relative payback is? a) The economic life of the equity / payback period. b) The economic life of the asset / present value of the cash outflows. c) The economic life of a liability / its payback period. d) PV of the cash inflows / PV of the cash outflows. e) The economic life of the asset / payback period.

e) The economic life of the asset / payback period.

For what does U.C.C. stand? a) Unified Corporate Certification b) Unlimited Capital Control c) United Commercial Corp. d) Union of Commercial Creditors e) Uniform Commercial Code

e) Uniform Commercial Code

A normal yield curve a) slopes upward from 30-day to 30-year maturities. b) is not inverted. c) shows a normal distribution of bond returns. d) currently has a 5% nominal return for 30 to 90 days. e) a & b.

e) a & b.

According to text, the NPV method of ranking and selecting capital investment proposals has one (some) problematic assumption (s). a) Projects are approximately the same length of time. b) Projects are roughly the same size. c) Projects must have close to the same profitability index value. d) All of the above. e)a & b.

e) a & b.

Going public via the "back door" a) Usually saves the cost of the investment banker. b) Means that you may not have a market maker for your stock. c) You use Form SB-2. d) All the above. e)a & b.

e) a & b.

According to Stancill, what are the ingredients for a startup? a) the basic idea and the key person or team b) a vision, your mission, and a sustainable business plan c) the PPM and the venture capital. d) a devoted entrepreneur and the right team. e) a & c.

e) a & c.

NIPD a) is a measure of cash flow. b) refers to net income plus depreciation. c) are the top two lines in traditional cash flow statements (not Stancill's). d) none of the above. e) a, b & c.

e) a, b & c.

SPACs a) offer an alternative way to go public for private firms. b) are special purpose acquisition companies. c) have become more much common in the past two years. d) accounted for more than 600 IPOs in 2021 alone. e)all of the above.

e) all of the above

The Federal Reserve a) has a dual mandate from Congress. b) was formed less than 150 years ago. c) is currently led by Mr. Powell. d) held the Fed funds rates at 0 to 25 basis points from Mar. 2020 to Mar. 2022. e) all of the above

e) all of the above

According to the text, what do non-manufacturing and non-distribution companies, like internet or service companies do to manage their Income Statement? a) Manipulating inventory valuation. b) Using reviewed statements. c) Falsely report sales. d) Capitalize expenses e)c & d.

e) c & d.

R(j) = Rf + Beta(j) (Rm - Rf) is a) the formula for WACC. b) the Expected (IRR) or ERR. c) a one-factor model. d) the CAPM. e) c&d.

e) c&d.

According to the text, in classic corporate finance, we minimize ________ and in entrepreneurial finance we minimize ________. a) standard deviation, ERR. b) WACC, IRR c) IRR, WACC. d) NOCF, NOCF''. e) i, i + S.F.

e) i, i + S.F.

Three advantages of going public over private placements for funding are a) lower taxes, less expensive accounting and faster. b) reduced costs, faster process, more confidential. c) avoiding Sarbanes-Oxley regulations, lower federal taxes, more confidential. d) easier to complete, cheaper, faster. e)lower cost of capital, public stock for acquisitions, greater liquidity.

e) lower cost of capital, public stock for acquisitions, greater liquidity.

Going off the record with your banker a) is good for reducing agency costs. b) is good for your firm's morale. c) is good for increasing your firm's book equity. d) all of the above. e) none of the above.

e) none of the above.

Why is bankruptcy different in entrepreneurial finance than bankruptcy in classic corporate finance? a) In entrepreneurial finance, bankruptcy is important to diversified shareholders. b) In entrepreneurial finance, bankruptcy is the costless transfer of ownership from equity holders to debt holders. c) In entrepreneurial finance, bankruptcy is less likely during a credit crunch. d) In entrepreneurial finance, bankruptcy is a change of ownership without interruption of operations. e) none of the above.

e) none of the above.

Functional Management in the text is characterized as a) charismatic. b) confident. c) competitive. d) a, b & c. e) replaceable parts.

e) replaceable parts.

Factoring

the process of selling accounts receivable for cash