Corporate Finance Quiz Answers
The pro-forma enterprise value of Amazon Inc. is expected to be:
$1,769,316
Please open the attached Excel file. Budgeting & Forecasting Assessment-Questions.xlsx Use simple linear regression to estimate the relationship between promotion and revenue for ABC Company. What will the revenue be when the promotion cost is 150?
$1059.51
Please open the attached Excel file. Budgeting & Forecasting Assessment-Questions.xlsx Use simple linear regression to estimate the relationship between promotion and revenue for ABC Company. What will the revenue be when the promotion cost is 150?
$1059.51
On March 1st, Mr. Smithe signed up for a fitness program at Fit Co. and paid $960 for the entire program upfront. The program includes a total of 12 sessions and two sessions are delivered each month. How much revenue from Mr. Smithe should Fit Co. recognize at the end of March?
$160
Total transaction costs, based on the assumptions provided, are expected to be:
$22,002
The adjusted pro-forma net earnings for Amazon Inc. is expected to be:
$22,711
Total expected equity financing for Amazon's purchase of Walmart, at the assumed 50-50% equity and debt financing deal mix provided, is as follows:
$241,356
The expected pro-forma share price of Amazon is expected to be:
$3,099.40
The incremental annual depreciation expense as a result of Amazon's acquisition of Facebook, is expected to be:
$36,847
Pro-forma FY+1 EPS for Amazon Inc. is expected to be:
$36.77
Calculate the deferred tax liability given the following items incurred in 2020 by Company B. Bonuses are tax deductible only in the year in which they are paid.
$372
If ABC Inc. buys a piece of equipment for $50,000, will use it in the business for 5 years and in 5 years expects to sell it for $10,000. What should ABC Inc. show in its cash flow statement in the year of purchase?
$50,000 cash outflow under investing activities
Company A has 800 employees, and it decides to grant each of the employees 50 share options as part of its new rewards plan. The options are exercisable over 5 years and subject to a 3-year service condition. The fair value of each option at the grant date is $16. The company estimates that 80% of its employees will meet the service condition required for receiving the options. Calculate the total share-based payment expense for Company A assuming that 80% of the employees actually meet the service condition.
$512,000
Additional annual interest expense due to new debt issued in relation to the transaction is:
$7,482
Company Inc. enters into a 10-year finance lease at the beginning of 2021 for a total of $250,000. The annual lease payment is $25,000 (payable at the end of each year) and the rate implicit in the lease is 5%. No initial direct costs are incurred. How much interest expense should be recognized in 2021?
$9,652
The implied enterprise value of Snap Inc., calculated using the assumptions and acquisition premium provided, is:
$91,669
The total after-tax pro-forma adjustment to Amazon's net earnings is expected to be:
($31,109)
What formula below can be used to forecast inventory?
(Inventory days / 365) x Cost of sales
What is the impact on cash flow from operations in the current year based on the change in operating assets and liabilities listed below?
-200
Suppose the following formula is inputted into Excel:=MROUND(1/4,100)The output in the cell will be:
0
Suppose you have inserted a line on a PowerPoint slide. The line is selected, and you are currently editing the line on the Format tab under Drawing Tools. Which of the following measurements for height and width (respectively) would make the line completely horizontal?
0cm; 75cm
Calculate the end of the year cash balance based on the information below: Beginning of the year cash balance: 2,000 Net income: 300 Depreciation: 140 Increase in accounts payable: 60 Acquisitions of PP&E: 580 Dividends paid in the current year: 130 Increase in long-term debt: 200
1,990
Rank the assumptions (drivers) according to sensitivity from lowest to highest. Revenue COGS Discount Rate EV/EBITDA
1. Discount Rate 2. EV/EBITDA 3. COGS 4. Revenue growth
Calculate the 2 year annuity factor if the required rate of return is 10%.
1.736
What is the yield to maturity for a 3 year bond with a 10% annual coupon if the bond is trading at par?
10.00%
What is the weighted average cost of capital if a business has a cost of equity of 12%, a cost of debt of 10%, tax rate of 25%, 20 million market value of debt, and 60 million market value of equity?
10.9%
Use the same Excel data in the previous question and run a multiple regression to estimate the relationship between promotion, advertising (independent variables) and revenue (dependent variable). Calculate the revenue if the promotion cost is $150 and the advertising cost is $250.
1060.83
What is the cost of equity using the capital asset pricing model if the risk free rate is 4.5%, the beta is 1.75 and the equity risk premium is 4.25%?
11.94%
Within how many months of the balance sheet date is a current liability usually payable?
12 months
What's the forecasted EBIT based on the information below? Revenues: 56,000 Cost of goods sold: 32,000 SG&A: 8,500 Depreciation: 2,700 Interest: 1,200 Taxes: 3,800
12,800
Given the above screenshot, which of the following is the resulting value in cell G2?
12/31/2020
Based on the information provided, calculate the revenue variance percentage and determine whether it is favorable or unfavorable.
16.67% favorable
What's the depreciation expense based on the information below? Depreciation (percent of sales): 4% Revenues: 60,000 Gross profit: 25,000 PP&E: 40,000
2,400
Which of the following companies has the lowest degree of leverage?
20% Debt, 80% Equity
An insurance company has provided you with a sample of paid claims. The sample includes the following claims: 192, 113, 200, 287, and 225. What are the mean and the variance respectively of this sample rounded to nearest whole number?
203, 3942
The opening balance of Company A is 25,000, and the repayment is scheduled for 1,000 per month at an annual interest rate of 5%. Use the average debt balance to calculate the interest payment. The closing balance of debt at the end of the month is _____ and the interest payment is _____.
24,000; 102
The annual accounts receivable is 3,000; the annual sales 40,000, and the gross profit margin is 40%. The receivable days estimated from the data above is _____.
27.4
What do you set as the angle of the first slice in order to properly convert and format the above gauge chart?
270°
What is the share price when COGS increases by 5%?
29.29
Suppose you want to make a gauge chart on website traffic in the same format as in the presentation. This gauge chart was based on the following data What value should be outputted as in cell E71?
290
Forecast the 2019 Cost of goods sold on the previous year's number and the assumptions
32,400
Company A has 279,000 basic shares outstanding and 26,000 outstanding options and warrants. The exercise price of these options is $3.75. The company also has $200,000 of convertible bonds with an effective conversion price of $4.00. The average market share price for the reporting period is $7.50. What is the diluted shares outstanding using the treasury stock method & if-converted methods?
342,000
What is the share price when the discount rate is 13% and revenue growth is 15%?
36.70
The annual accounts payable is 4,800; the annual revenue is 75,000, and the gross profit margin is 40%. The payable days estimated from the data above is ______.
39
Forecast the accounts receivable for Company XYZ using the following annual information. Receivable days assumption = 55 days Payable days assumption = 69 days Forecasted revenue = $263,500 Forecasted cost of goods sold = $114,780
39,705
What's the forecasted capital expenditure based on the information below? Net PP&E beginning of period: 15,000 Net PP&E end of period: 17,500 Depreciation expenses: 2,400
4,900
The PP&E gross book value at the start of the month is 60,000, and the CAPEX of the month is 12,000. The accumulated depreciation at the start of the month is 25,000; the depreciation expense of the month is 750.The net book value of PP&E calculated from the data above is _____.
46,250
What is the forecasted value of property, plan and equipment (PP&E) based on the following information: Capital asset turnover ratio: 2.5 Forecasted revenues: $120 Forecasted costs of goods sold: $80
48
What is the total cash from operating activities based on the information below? Net income: 500 Depreciation: 80 Increase in receivables: 100 Increase in inventory: 50 Increase in payables: 60
490
What is the present value of a constant perpetuity of 25 per year where the required rate of return is 5%?
500.00
The result of =ROUND(513.2413,2) is __
513.24
Calculate a four-day moving average for the price of the stock for the end of Day 7. Day 1 - 62.00; Day 2 - 56.00; Day 3 - 50.00; Day 4 - 60.00; Day 5 - 59.00; Day 6 - 55.00; Day 7 - 59.00; Day 8 - 63.00
58.25
Cost of Equity 5% Cost of debt 7% % Debt 60% % Equity 40% Given the data in the above table, what is the weighted average cost of capital of this company?
6.2%
Suppose you want to make a gauge chart on website traffic in the same format as in the presentation. This gauge chart was based on the following data: What value should be outputted as in cell E69?
60
What's the retained earnings end of period based on the information below? Retained earnings beginning of period: 7,500 Net income: 2,300 Dividends paid: 1,700
8,100
If Beta Limited has opening PP&E balance of 150, a depreciation expense of 75, and a closing PP&E balance of 170, what is Beta's net capital expenditure (or CAPEX)?
95
The formula contained in the YELLOW cell (G179) is ___________ Hint: do not forget the $ when using absolute references. Use absolute reference so this formula can be copied over to other cells in this section without any manual modification.
=SMALL($F$177:$F$180,E179)
What is the correct syntax for the =YEARFRAC function?
=YEARFRAC(start_date,end_date,[basis])
Identify which of the following is not a goal of the variance dashboard.
A detailed written report
What does a diagram of a perfectly positive correlation look like?
A perfectly straight line that slopes from the bottom left to the top right quardrant
What combination of keys turns the value in a cell into a percentage?
ALT + H + P (PC) / Ctrl + Shift + % (Mac)
Assuming a section of data is highlighted, which of the following Excel shortcuts opens Recommended Charts?
ALT + N + R
Identify the cause of an unfavorable variance in profit.
Actual material cost is higher than budget
Debt issuance costs are:
Amortized over the term of the related debt liability
Select the FALSE statement on the five ethical approaches to decision making.
Based on the justice approach, you should treat people differently to provide the greatest good for the greatest number.
What's the best way to manage the situation where individuals rationalize committing misconduct in an organization?
By communicating corporate values and emphasizing those values
The formula contained in the yellow highlighted cell (I39) is = 1. ( 2. , I9,I24). This formula can be copied over to the entire live scenario section without any manual modification. (Hint: do not forget to use absolute references.)
CHOOSE $I$4
As an alternative to CTRL + C and then CTRL + V to perform copy and paste, what combination of keys (as outlined in the videos) will perform the same action?
CTRL + D
Suppose you want to copy a table from Excel and paste onto a PowerPoint slide. Which of the following Excel shortcuts ONLY allows you to paste as a table?
CTRL + V
Which charts would be better choices to visualize a company's actual performance ratio in comparison to a target ratio? Select TWO best answers.
Column and marker chart Two-series line chart
Which of the following is NOT a pre-attentive attribute discussed in the course?
Comments
A liquidity analysis would commonly be found under which section of a pitchbook?
Company Overview
Large number of potential companies to compare to
Comparable company analysis
Observable current value for a company (what investors are actually paying for business right now)
Comparable company analysis
Readily available
Comparable company analysis
Cost Leadership
Competitive Advantage Analysis
Differentiation
Competitive Advantage Analysis
Which code of conduct and ethics policy will you violate if you influence the hiring manager to recruit your cousin in a position that he's not qualified for?
Conflict of interest
Which of the following is the best key performance indicator (KPI) for measuring customer satisfaction?
Customer retention rate
When performing a scenario analysis, which of the following tools/functions in Excel is used to create a dropdown list where we can select the live case?
Data Validation
Arise when the carrying amount of the liabilities is greater than the tax base
Deductible Temporary Differences
Generally arise when the tax base of the assets is greater than the carrying amount
Deductible Temporary Differences
Give rise to deferred tax assets
Deductible Temporary Differences
Which of the following statements about income taxes is not correct?
Deductible temporary differences give rise to deferred tax liabilities, meaning that more tax is payable in the future.
Which of the following items can be found in a published cash flow statement under "operating activities"? Select ALL correct answers.
Depreciation Changes in operating assets and liabilities
The effect of the transaction on FY + 1 EPS for Amazon Inc. is as follows:
Dilutive by 19.57%
Which of the following components is not necessary to have in every master budget?
Direct material purchases budget
You started a new full-time job a few weeks ago and you just learned that your family owns part of a business that provides services to your employer. What should you do?
Disclose the conflict of interest to your manager.
The net profit margin ratio can mathematically be broken down as "Tax impact x Capital structure impact x..."
EBIT / Sales
Which of the following is the correct definition for free cash flows to the firm?
EBIT x (1 - Tax Rate) + Depreciation +/- Changes in Working Capital - Capex
Based on the course, which of the following ratios commonly estimates the terminal value in a discounted cash flow (DCF) analysis?
EV/EBITDA
Which of the following signs indicate weak ethical culture in an organization? Select ALL relevant signs.
Employees are encouraged to do whatever it takes to achieve their goals. Individuals often rationalize their behavior by saying "everybody does it."
What is the main purpose of using guides in PowerPoint?
Ensure alignment
Which of the following transaction costs will not be included in the pro-forma adjustment to net earnings?
Equity financing fees
What actions could a company take to reduce its working capital funding gap?
Tighten customer credit terms
Horizontal analysis allows us to analyze performance over:
Time
Which of the following represents the standard ordering of sections for an investment banking pitchbook?
Title Page -> Table of Contents -> Company Overview -> Industry Overview -> Valuation -> Transaction Opportunities -> Team Overview -> Appendices
Which of the following best describes the purpose of the notes section in PowerPoint?
To keep information viewable only to creators and editors of the presentation
What is the principal purpose of charging depreciation on non-current assets?
To spread the cost of the assets over their estimated useful lives
Which type of chart is best for showing the impact of sensitivity analysis on a business?
Tornado chart
Which financial leverage ratio is used with two other ratios to mathematically produce the return on equity ratio?
Total Assets / Equity
Which Excel function or tool will you use to display the cells that are referred to by a formula in the selected cell?
Trace Precedents
Which tab of the ribbon would you use to insert a fade in between slides?
Transitions
Suppose you want to insert a company logo on the bottom right corner of every slide except for the first page of your pitchbook. Which of the following is the best method to format this pitchbook?
Under slide master, insert logo onto every slide layout except the one you used for the first page.
Using the information given in the table below, identify whether the sales volume variance and price variance are favorable or unfavorable.
Unfavorable, favorable
A precedent transactions overview would appear under which section of an investment banking pitchbook?
Valuation Overview
Which of the following M&A transaction equations is correct?
Value created = Stand-alone value + Net synergies - Consideration (price paid)
Under which tab in Excel would you be able to open the Page Break Preview?
View
Which tab allows you to add guides (guidelines) to help design your pitchbook?
View
Select the ALL correct statements on whistleblowing.
Whistleblowers tend to be company insiders who have a strong moral compass.It's important to keep the whistleblower anonymous through a confidential whistleblower reporting mechanism.
Which of the following slide sizes are best practice for a live presentation?
Widescreen (16:9)
Which ratios indicate how efficiently the company generates sales from its assets?
Working capital turnover
You should perform sensitivity analysis when:
You need to determine which assumptions matter the most
Inputs should be blue colored font and should have ________ only. Process and outputs should be in black colored font and have _______ only.
hardcoded numbers only, formulas only
To arrive at operating cash flows, you should start with _______, _______ non-cash items and then adding or subtracting changes in working capital.
net income, adding
The chart above is an example of a combination of a ________ chart and a ________ chart.
stacked column, line
Before protecting a worksheet to avoid people from editing the formulas, you must ________.
unlock the input cells
Which of the following is not a function of public accounting firms?
Financial Planning & Analysis
Identify the statement that is most accurate.
Financial information that has confirmatory value provides feedback that either confirms or changes previous evaluations.
What is the main argument of "Beyond Budgeting"?
Firms today need to be more flexible and responsive to deal with unpredictable change, hyper competition and increasingly fickle customers
Suppose you want to crop a newly inserted picture on PowerPoint. Which of the following steps allows you to crop a picture into a shape?
Formats -> Size -> Crop -> Crop to shape
To find out the value of the assumptions that are needed to hit a certain budget target, you would use ______; to optimize an output, you would use ______.
Goal seek, solver
Which of the following statements regarding the accounting for business combinations is false?
Goodwill is the difference between the consideration transferred by the acquirer to the acquiree and the fair value of identifiable assets acquired.
For a line graph, removing which of the following items would create the cleanest look?
Gridlines
For which organization would you expect to see the highest inventory turnover ratio?
Grocery retailer
Which ratio would you use to determine the profitability of the goods sold by a company?
Gross profit margin
In a bottom-up approach, managers should have a ________ level of controllability and a ________ level of involvement in budget setting.
High, high
Which of the following combinations will allow you to align multiple items to the left?
Home -> Drawing -> Arrange -> Align -> Align Left
For a buy-side pitchbook, which of the following is NOT a key piece of information that must be available under the team overview?
How has the investment bank's stock performed over the past 5 years?
The formula contained in the ORANGE cell (H178) is = 1. ($A$177:$G$180, 2. ( 3. ,$F$177:$F$180,0),MATCH($A$177,$A$177: $F$177,0)) Hint: do not forget the $ when using absolute references.
INDEX MATCH G178
A sound accounting framework allows for all of the following benefits except:
Identical items being reported on the financial statements of different companies
Under which section would you commonly find a competitive environment analysis?
Industry Overview
Data validation works for setting a reasonable range for _______.
Inputs
Identify which trait below about incremental budgeting is FALSE.
Inputs or activities are determined by the budgeted outputs
The debt to tangible net worth ratio is calculated as follows:
Interest Bearing Liabilities / (Equity - Intangible Assets)
When calculating the quick ratio or "acid test" which current asset or liability is omitted?
Inventory
Which of the following best describes a leveraged buyout fund's acquisitions?
Investing in mature businesses
Identify which of the following is NOT an advantage of performing multiple regression.
It is easy to use and audit
Conservatism Principle
It provides guidance on how to record transactions when there is uncertainty.
Historical Cost Principle
It states that assets and liabilities are recorded on the financial statements at the cost at which they were acquired or assumed.
Objectivity Principle
It states that financial statements must be free from bias and based on verifiable evidence.
Matching Principle
It states that the expenses of a business should be recorded in the periods in which the corresponding revenues are earned.
Economic Entity Principle
It states that transactions carried out by a business are separated from those conducted by its owner.
Identify which of the following is NOT a good way for managers to use a budget.
Managers can use budgets alone to estimate how well they perform over a period of time
The highlighted pane in orange in the screenshot below is known as the
Navigation pane
Company Co. has 1,000 employees and it decides to grant each of the employees 200 share options as part of its new rewards plan. The options are exercisable over 5 years and subject only to the condition that the company's stock price must be at least 30% higher than its original issue price. Company Co.'s share-based payments are subject to:
Non-vesting condition
If a company wanted to finance the purchase of equipment without diluting shareholders equity, which of the following operation could it consider?
Obtaining a loan from a bank
Where would advertising costs normally be found?
On the income statement, within selling, general and administration
Which example could impair independence in appearance?
One of your family members is connected to a client of your organization.
How would you be able to view all slides of a pitch book simultaneously?
Open Slide Sorter
Working capital movement is included in which section of the cash flow statement?
Operating activities
Which ratio is not one of the three ratios that multiply together to produce the return on equity ratio?
Operating profit margin
Economic Forecasting
PEST
Social Forecasting
PEST
Technological Forecasting
PEST
Which of the following describes the correct budgeting process?
Planning & communication - Establish objectives & targets - Develop a detailed budget - Review & approval - Implementation and management
Potential new entrants and barriers to entry
Porter's 5 Forces
Suppliers and their bargaining power
Porter's 5 Forces
Includes synergy value
Precedent transaction analysis
Includes takeover premium / control premium
Precedent transaction analysis
Shows the value investors paid for the entire company (not just 1 share)
Precedent transaction analysis
Which of the following is not a required criterion for a transaction to be considered a business combination?
Presence of outputs
Which of the following is NOT a best practice for financial model inputs?
Protect inputs by locking input cells
Which are desired outcomes when trying to reduce the ethics risks in the workplace? Select ALL correct answers.
Reduced retaliation for reporting A decrease in observed misconduct
What is the main role of the supervisory level in an organization to create an ethical culture?
Reinforcing ethical behavior
Which of the following characteristics does not enhance the usefulness of financial information?
Relevance
When creating a waterfall chart for ABC Inc.'s 2018 net earnings, which of the data points do you need to set as totals? Select ALL correct answers.
Revenue Gross profit Net earnings
Which of the following is not a standard section in an investment banking pitchbook?
Revisions
If the last data point in this chart is the accumulated total (1258), what will you do to set up the chart properly?
Right click the last data point and select "Set as Total"
Which of the following is a tertiary ratio that drives profitability?
SG&A Expense / Sales
Opportunities
SWOT Analysis
Weaknesses
SWOT Analysis
When calculating turnover of property plant & equipment and receivables, which item from the income statement do we use?
Sales
When performing a vertical analysis which income statement item do you use to determine the cost contribution for each expense category? (What is the denominator?)
Sales
What's the best way to center the heading text "Business Unit Revenue ($000)" across the cells in dark blue (B2-F2) for easier editing?
Select all cells in dark blue - Format Cells - Alignment - Horizontal: Center Across Selection
Out of the four different types of costs, how would you classify overhead costs? (Hint: Overhead costs are unavoidable costs a company must spend to produce any amount of outputs up to a certain level. There's usually a threshold where the outputs exceed the maximum capacity which requires additional spending for every extra unit of outputs.)
Semi-variable cost
Building a heat map would be an appropriate way to visualize data in which of the following?
Sensitivity Analysis
If you want to test how an increase in percentage of cost of good sold affects the contribution margin, you would use ________.
Sensitivity analysis
From the chart above, decision makers should pay most attention to the month:
Sep 2018
Which of the following items are not included in working capital?
Short term investments
The purpose of the cash flow statement is to:
Show where the business's cash has come from and where it has been spent
Which is not a type of note found in a set of financial statements?
Significant internal controls
If you wanted to insert the same company logo onto the right-hand corner of every slide in the pitchbook (footer), which of the following slide views would you open to complete the task the quickest?
Slide Master
To create a bullet chart as shown below, you should first select the data and insert a:
Stacked bar chart
What type of chart did we use to build a tornado chart?
Stacked bar chart
Budgets must link ________ to objectives, so budgeting is a tactical implementation of the ________.
Strategies, business plan
Arise when the tax base of the liabilities is greater than the carrying amount
Taxable Temporary Differences
Generally arise when there are differences that result in current accounting income being greater than taxable income
Taxable Temporary Differences
Give rise to deferred tax liabilities
Taxable Temporary Differences
Which of the following items are not included when determining income from operations?
Taxes
Using the PEST analysis, which of the following should a company like Apple Inc. worry about the most?
Technological forecasting and trends
How do you find the terminal value using the EV/EBITDA exit multiple?
Terminal EV = EV/EBITDA x EBITDA value of final year of forecast
Suppose you have selected to Format Shape of a chosen textbox. Resize shape to fit text is under which tab?
Text Box
Which of the following is not a correct description of how an operating lease is recognized on the financial statements?
The amortization expense of the right-of-use asset is calculated using the straight-line depreciation method over the lease term.
If the total assets to equity ratio of a company is increasing, it is possible that:
The company is increasing the use of debt and getting higher financial leverage
Based on the following information from ABC Company's financial analysis, which one of the following statements is NOT true?
The company's ability to cover its short-term obligations is getting higher over the five years.
What does variable cost with economies of scale mean?
The higher the volume of output, the less it costs to produce one extra unit
Which of the following is NOT an advantage to link workbooks?
The links will update themselves when the file name changes
The debt to equity ratio indicates:
The proportion of the company financed by lenders versus owners
Which of the following is NOT true about moral principles?
The same moral principles are always shared among and followed by different social groups.
Complex financial models are all of the following EXCEPT:
They are easy to follow and audit
Which of the following best describes accounting principles in general?
They outline the fundamental rules and concepts and establish the framework on which detailed accounting standards are based.