ENT 4412 Final
Which of the following must be considered when using the discounted cash flow method to value a business? risk of cash flows amount, timing, and risk of cash flows amount of cash flows timing of cash flows
amount, timing, and risk of cash flows
Strategic planning for the purchase of a new piece of manufacturing equipment would be an example of: operational budgeting product prioritization process prioritization capital budgeting
capital budgeting
Long term disability insurance covers about 60% of your salary completely replaces your salary covers 25% of your salary covers 75% of your salary
covers about 60% of your salary
If you are analyzing the discounts you are offering customers and evaluating how those discounts are impacting your ability to collect the sales price for your products, you are focusing on your business' ___________ capability of value-based pricing. pricing psychology pricing economics price management superior customer insight
price management
If you are evaluating the effect that a change in price will have upon customer demand for your product, which of the following value-based pricing capabilities are you considering? pricing economics price management pricing psychology superior customer insights
pricing economics
All of the following are disadvantages of having too much inventory except: difficulty in storage and control reduced holding costs increased risk of product obsolescence reduced availability of cash
reduced holding costs
A company could utilize the economic order quantity model to determine __________. set-up costs holding costs the optimal number of units per order
the optimal number of units per order
NPV accounts for the none of these inventory of time time value of money timeless value of money
time value of money
If you borrowed $150,000 to invest in a new business storefront at an 8% interest rate and pay approximately 35% in federal/state taxes, what is your post-tax cost of the debt? $7,800 $12,000 $4,200 $9,600
$7,800
Broadly defined, how many types of customers are there? 4 2 5 3
4
After stock has been issued it cannot be repurchased. True False
False
Which of the following statements about Dupont Framework is false? If a firm's sales are greater than its assets, its efficiency indicator will be > 1 If a firm's assets are increasing and its sales are decreasing over time, then its efficiency component of Dupont is also decreasing If a firm's net income has increased relative to sales, then the profitability component of Dupont will decrease If a firm's equity is greater than its assets, its leverage indicator will be < 1
If a firm's net income has increased relative to sales, then the profitability component of Dupont will decrease
If your business is currently experiencing cash flow issues, which of the following actions would you avoid? Reducing collection times for receivables Increasing inventory Delaying current accounts payable Reducing operating expenses
Increasing inventory
In order to enhance production capabilities, your company purchased a new piece of equipment. The payment for the new machine would be found under which of the following categories of the cash flow statement? Assets Investing Financing Operating
Investing
Cash flow statements are divided into the following three sections: Assets, liabilities, and equity Revenues, expenses, and net income Inflows, outflows, and accruals Investing, operating, and financing activities
Investing, operating, and financing activities
Which of the classifications of financial ratios would be most interesting to a financial manager concerned with the company's ability to meet its short-term obligations? Activity Liquidity Solvency Profitability
Liquidity
Based on the information presented in the Module, which forecasting frequency typically produces the most accurate results? Weekly Daily Quarterly Annually
Quarterly
Which kind of forecast can be used in a stable industry and stable market that is not impacted by seasonality? Moving average forecast Weighted moving average forecast Expected value analysis Rollover forecast
Rollover forecast
Which company departments need to be involved in developing a sales forecast? Sales, Marketing, Finance, Operations Sales and Marketing Departments The Sales Department The Marketing Department
Sales, Marketing, Finance, Operations
When considering the sales cycle's impact on cash flows in a manufacturing business offering credit, which of the following statements is false? Cash inflows occur when receivables are collected. Cash is spent on the process of converting raw materials into finished goods. The purchase of raw materials represents a cash outflow. Correct! Selling the product and collecting the cash for credit sales occur simultaneously.
Selling the product and collecting the cash for credit sales occur simultaneously.
Which of the following is not one of the functions of inventory? Group of answer choices To take advantage of quantity discounts To combine or couple parts of the production process To hedge against inflation To decouple the firm from fluctuations in demand
To combine or couple parts of the production process
One dollar is worth more today than that same dollar will be worth in the future True False
True
Worker's compensation insurance is required by law, but the number of employees needed for coverage varies from state to state. True False
True
Your company's current ratio is 0.72. Which of the following is not true about your firm? Your current assets exceed your current liabilities by 28% Your firm's current liabilities are greater than its current assets Your firm, if necessary, could not pay all its current liabilities with its current assets Your cash and other liquid assets combined are less than your debts
Your current assets exceed your current liabilities by 28%
An investment is a purchase you make hoping to get a past profit a future profit a random result protection from a loss
a future profit
In a manufacturing firm, the master budget begins with a forecast of ______. Group of answer choices labor and materials sales overhead production
sales
You are considering taking on an equity partner in your company. Which of the following scenarios is most likely an advantage of an equity partnership? Your equity partner has core competencies complimentary to your skill set. Your partner wants a majority ownership and controlling interest in the company. Your partner is a family member that you sometimes do not get along with. Your equity partner's expectations for ROI may fluctuate.
Your equity partner has core competencies complimentary to your skill set.
If you offer credit to your customers, which of the following is least likely to occur as a result of you offering that credit? Some of your customers may not pay. Your sales will likely decrease. You could incur costs related to managing the receivables. You may experience cash flow issues if customers pay late.
Your sales will likely decrease.
Your furniture business sells couches. You price those couches to account for the cost you paid for the couches plus a standard markup you have established. You are using a ________ strategy. value-based pricing cost-based pricing market penetration competitive pricing
cost-based pricing
Which of the following is the least effective effort in collecting overdue receivables? Contact the customer via phone or email. Send overdue accounts to collections and cancel customer credit immediately. Send paper statements to customers. Meet with customer to discuss overdue accounts.
Send overdue accounts to collections and cancel customer credit immediately.
If you are concerned about your company's ability to generate sales through its efficient use of assets, you should calculate the _____ ratio. receivables turnover return on assets asset turnover return on investment
asset turnover
Tax laws vary by location and business structure industry product type tax year
business structure
One of the key performance indicators that can be managed is contribution margin sales stock price ending inventory
contribution margin
If you are valuing a piece of equipment by considering its replacement cost today less any depreciation or wear and tear, you are utilizing the asset valuation technique referred to as ________. discounted cash flow approach market approach cost approach income approach
cost approach
The four areas in which decisions are made are: marketing, research & development, production, finance Operations, production, finance, marketing marketing, research & development, production, forecasting finance, operations, marketing, production
marketing, research & development, production, finance
The ______ budget includes activities and planned expenditures that occur outside of production. sales selling, general, and administrative overhead labor and materials
selling, general, and administrative
if the NPV is zero, the investment earns a rate of return equal to zero NPV cannot be zero that of the discount rate 1
that of the discount rate
Capital budgeting analysis can help to decide if the investment will bring excellent profits will increase employment in the area none of these makes sense
makes sense
Forecasts are created in marketing production research & development operations
marketing
One limitation of the NPV method is the model assumes unlimited capital and lack of reasoning infinite amounts of capital and rationing unlimited capital and lack of rationing limited capital and lack of rationing
unlimited capital and lack of rationing
Scoring is based on year over year improvement in all areas total sales contribution margin increase in stock price
year over year improvement in all areas
The two basic types of liability insurance are____________________ and _________________. Errors and Omissions/Product Liability Service Level guarantees/commercial auto insurance business interruption/key man
Errors and Omissions/Product Liability
Which of these forecasting techniques has the advantages of being easy to calculate and reacts quickly to changes in demand caused by trends or seasonality? Expected Value Analysis Moving Average Forecast Exponential Smoothing Weighted Moving Average
Exponential Smoothing
Long-term investments in land, buildings and specialized equipment are much more liquid than other investments True False
False
To accomplish your goal of gaining substantial market share in a new market with your unique product, you decide to set your prices as low as possible with hopes that you can raise them once you have a substantial customer-base. This strategy is referred to as ___________. cost-based pricing value-based pricing competitive pricing market penetration
market penetration
You have received a shipment of product components but they have not yet been processed in your facility. These goods would be an example of ____________. maintenance/repair/operating (MRO) raw material finished goods work-in-process
raw material
Debt financing means _____ while equity financing involves _______. you are borrowing money that must be repaid with interest; you selling shares of your business in exchange for money you lose shares of your company; you gaining back shares of your company you are borrowing money non-traditionally; you borrowing money traditionally you must give up part of your ownership in the company; you giving your controlling interest in the company
you are borrowing money that must be repaid with interest; you selling shares of your business in exchange for money
You have purchased inventory from a supplier on credit. Their terms are 2% 10 net 30. If you wanted to delay your accounts payable payments, which terms below would be the best to negotiate with your supplier? 2% 10 net 40 2% 10 net 45 3% 10 net 30 3% 10 net 20
2% 10 net 45
Why should you fund projects internally with cash from profits, as opposed to debt or equity financing, when possible? All of the above You can retain all of your assets. You can maintain decision-making and ownership of your company. You can avoid costs of debt such as interest and risk of default.
All of the above
Cash flow is one of the highest business priorities because: "cash flow death" is inevitable for all companies it is impossible to budget or plan for cash flows Answer profitable companies may still experience cash flow problems raw cash flow data is the best indicator of company performance
Answer profitable companies may still experience cash flow problems
Which of the following statements about factoring is true? Factoring is common in industries with low receivables turnover. Factoring is for only large corporations. Factors are most concerned about creditworthiness of the business owner. Factoring is a loan.
Factoring is common in industries with low receivables turnover.
There is no limitation to the amount of funds that can be borrowed. True False
False
Which of the following financial statements would disclose a company's short-term and long-term debt obligations? Income statement P & L statement Balance sheet Cash flow statement
Balance sheet
Your company has purchased a brand new production facility. Which of the following financial statements would disclose the source of the financing for your company's new facility? Group of answer choices Cash flow statement P & L statement Balance sheet Income statement
Balance sheet
What is the one type of insurance that every business needs to have? Business Liability Worker's Compensation Business Interruption Key Man
Business Liability
Which of the following statements about business valuation is not true? Deal structure is a vital component of the valuation process. Multiples reflect market behavior including demand and perceived risk. Commonly available businesses are priced with a higher multiple. A company's adjusted net income considers owner's salary and cash benefits.
Commonly available businesses are priced with a higher multiple.
Which of the firms below will have the highest ROE? Firm B with leverage of 2.5 Firm C with leverage of 2.0 Correct! Firm A with leverage of 2.9 None of the above - leverage does not affect ROE
Firm A with leverage of 2.9
The leverage component of the Dupont Framework can be calculated by dividing a firm's _____ by its ______. assets; liability assets; equity net income; sales debt; equity
assets; equity
Based upon your analysis of a competing service provider's fees and a survey about potential customers' perception of pricing, you decide to offer a good-better-best three-tiered pricing structure in addition to offering repeat customers 10% off their second purchase and 15% off their third purchase. You have adopted all of the following pricing strategies except: discount pricing cost-based pricing competitive pricing psychological pricing
cost-based pricing
Your company is strapped for cash and is having difficulties making payroll. Which of the following actions would not alleviate your cash flow issues? extending accounts payable selling or leasing assets delaying accounts receivable prioritizing or eliminating expenses
delaying accounts receivable
If you are concerned about how efficiently your company is generating sales with the assets it has, which Dupont Framework indicator would you be most interested in? solvency leverage profitability efficiency
efficiency
Multiplying a company's price-to-book ratio by a company's book value per share is an application of _______ to value a business. equity multiples earnings multiples income multiples sales multiples
equity multiples
Which of the following profitability indicators considers deductions for cost of goods sold, selling, general, and administrative expenses but does not include deductions for taxes and interest? revenue operating profit net profit gross profit
gross profit
Recently, you recognized the need for help and hired two new employees to count and sort inventory in your warehouse facility. This is an example of _____ costs. human capital facility service level management
human capital
Since many small- to medium-sized businesses are not actively publicly traded, it is challenging to utilize the ________ to value those businesses and their shares. market approach discounted cash flow approach cost approach income approach
market approach
The success of the investment depends on the amount of gross future cash inflows or gross cash savings in relation to the cost net present cash inflows or present cash savings in relation to the cost leveraged cash inflows or leveraged cash savings in relation to the cost net future cash inflows or future cash savings in relation to the cost
net future cash inflows or future cash savings in relation to the cost
You have noticed increasing shipping and handling fees with one of your suppliers. Your number of orders with this supplier per year has also increased. The shipping fees would be considered as _____________. set-up costs holding costs order costs carrying costs
order costs
Common size financial statements and ratio analysis can show: Performance compared to industry standards How a company is performing with respect to a specific competitor Positive or negative trends within the company over time Performance over time, relative to competitors, and with respect to the industry
performance over time, relative to competitors, and with respect to the industry
One of the most important aspects to manage is projected ending cash position the amount of long-term debt the amount of short-term debt the number of shares outstanding
projected ending cash position
The establishment of quality and reliability factors is done in research & development marketing finance production
research & development
To fund the company's plans the financing area allows short-term debt, long-term debt, and stock issuance only long-term debt only short-term debt issuing stock
short-term debt, long-term debt, and stock issuance
The Dupont Framework is composed of the following performance indicators except: profitability solvency efficiency leverage
solvency
The Proforma shows projected results but it is only as good as the forecast market awareness production capacity research & development
the forecast
Investors wish to receive the greatest future benefit for the least investment cost an average future benefit for the average investment cost the least future benefit for the greatest investment cost an extraneous future benefit for the least investment cost
the greatest future benefit for the least investment cost
Capital budgeting involves a comparison of the magnitude of upfront benefits to the magnitude of estimated future multi-year costs the magnitude of future cost to the magnitude of estimated future multi-year benefits the magnitude of upfront cost to the magnnitude of estimated future multi-year benefits the magnitude of future cost to the magnitude of estimated past multi-year benefits
the magnitude of upfront cost to the magnnitude of estimated future multi-year benefits
The internal rate of return method shows Group of answer choices the profitability of investments and takes into account the time value of money the time value of money the increase in future average income the profitability of investments without taking into account the time value of money
the profitability of investments and takes into account the time value of money
