Q&A Hero

Q: Formal historical accounting procedures include explicit records of debt (interest and principal) and dividend capital costs. a. True b. False

Q: Private equity investors are owners of proprietorships, partners in partnerships, and owners in closely held corporations. a. True b. False

Q: Public financial markets are markets for the creation, sale, and trade of illiquid securities having less standardized negotiated features. a. True b. False

Q: Startup financing usually comes from entrepreneurs, business angels, and investment bankers. a. True b. False

Q: A venture's riskiness in terms of the likelihood of poor performance or failure decreases as it moves from its development stage to its rapid-growth stage. a. True b. False

Q: Traditional accounting does not focus on the implicit cost of equity that is the required capital gains to complement dividends. However, evaluation methods exist to determine this value by financial managers. a. True b. False

Q: True/False Questions for Appendix AEVA is a financial assessment of a venture's environmental value analysis.a. Trueb. False

Q: Indicate whether the statement is true or false.Liquidity premiums reflect the risk associated with firms that possess few liquid assets.a. Trueb. False

Q: Seed financing is generally associated with which of the following life cycle stages? a. development stage b. startup stage c. survival stage d. rapid-growth stage

Q: Which of the following is not part of the operating cycle? a. time it takes to produce products b. time it takes to sell products c. time it takes to pay suppliers d. time it takes to collect receivables

Q: A venture's operating cycle measures the time it takes to: a. purchase raw materials and assemble a product b. assemble a product and book the sale c. assemble a product, book the sale, and collect on the sale d. purchase raw materials, assemble a product, book the sale, and collect on the sale

Q: Which of the following is measured by dividing the average daily cost of goods sold into the average inventories? a. sale-to-cash conversion period b. inventory-to-sale conversion period c. purchase-to-payment conversion period d. cash conversion cycle

Q: Which of the following measures the average days of sales committed to the extension of trade credit? a. sale-to-cash conversion period b. inventory-to-sale conversion period c. purchase-to-payment conversion period d. cash conversion cycle period

Q: Which of the following conversion periods operates to reduce the length of the cash conversion cycle? a. inventory-to-sale conversion period b. sale-to-cash conversion period c. purchase-to-payment conversion period d. fixed assets-to-usage conversion period

Q: A major difference exists between a venture's operating cycle and its cash conversion cycle because the conversion cycle includes the time to: a. buy materials b. produce a finished good c. collect sales made on credit d. pay suppliers for purchases on credit

Q: Which of the following measures the average time it takes a firm to complete its operating cycle after deducting the days supported by trade credit and delayed payroll financing? a. sale-to-cash conversion period b. inventory-to-sale conversion period c. purchase-to-payment conversion period d. cash conversion cycle

Q: Based on the following information, determine the venture's inventory-to-sale conversion period: cash conversion cycle = 250 days; sale-to-cash conversion period = 60 days; and purchase-to-payment conversion period = 70 days. a. 70 days b. 140 days c. 240 days d. 260 days

Q: Based on the following information, determine the venture's cash conversion cycle: inventory-to-sale conversion period = 112.9 days; sale-to-cash conversion period = 57.1 days; and purchase-to-payment conversion period = 76.8 days. a. 170.0 days b. 189.7 days c. 93.2 days d. 133.9 days

Q: Which of the following is not considered to be an operating schedule? a. sales schedule b. balance sheet schedule c. purchases schedule d. wages and commissions schedule

Q: Which of the following conversion periods is not a component in the cash conversion cycle? a. inventory-to-sale conversion period b. sale-to-cash conversion period c. purchase-to-payment conversion period d. fixed assets-to-usage conversion period

Q: Based on the following information, determine the average receivables (rounded to thousands of dollars) that were outstanding: net sales = $575,000; sale-to-cash conversion period = 57.1 days; purchase-to-payment conversion period = 76.8 days; and cost of goods sold = $380,000. a. $90,000 b. $180,000 c. $121,000 d. $45,000

Q: Which of the following measures the average time from purchase of materials and labor to actual cash payment? a. sale-to-cash conversion period b. inventory-to-sale conversion period c. purchase-to-payment conversion period d. cash conversion cycle

Q: A firm would not be considered to be an early-stage venture when it reaches which of the following life cycle stages? a. rapid-growth stage b. startup stage c. survival stage d. early-maturity stage

Q: The process of examining exit opportunities is generally associated with which one of the following life cycle stages? a. early-maturity stage b. startup stage c. survival stage d. rapid-growth stage

Q: First-round financing is generally associated with which of the following life cycle stages? a. development stage b. startup stage c. survival stage d. rapid-growth stage

Q: Calculate the inventory-to-sale conversion period based on the following information: average inventories = $120,000; average receivables = $90,000; average payables = $40,000; cost of goods sold = $182,500; and net sales = $365,000. a. 240 days b. 180 days c. 90 days d. 60 days

Q: The sale-to-cash conversion period is calculated by dividing average revenues by net sales per day.a. Trueb. False

Q: The actions of screening business ideas, preparing a business plan, and obtaining seed financing occurs during a venture's development stage. a. True b. False

Q: Preparing monthly cash budgets for a full year allows the entrepreneur to determine whether there will be a cash need, the maximum size of the cash need, and whether the need can be repaid during the year. a. True b. False

Q: Cash shortages during the rapid-growth stage frequently derive from the lack of operating profits to fund working capital and fixed asset investments needed to support sales growth. a. True b. False

Q: Most early-stage ventures can easily locate debt-financing arrangements. a. True b. False

Q: First-round financing usually occurs during a venture's rapid-growth life cycle stage. a. True b. False

Q: Even in a young, successful venture, restricted access to bank credit and little to no access to short-term lending markets can hinder operations until the next round of financing. a. True b. False

Q: A venture's operating schedules typically include a sales schedule, purchases schedule, and wages and commissions schedule. a. True b. False

Q: A cash budget shows a venture's projected revenues and expenses over a forecast period. a. True b. False

Q: A venture's operating cycle measures the time it takes to purchase required materials, assemble, and sell the product plus the time needed to collect receivables if the sales are on credit. a. True b. False

Q: A venture's operating cycle is the same as its cash conversion cycle. a. True b. False

Q: The cash conversion cycle refers to the time it takes to convert a sale into net income. a. True b. False

Q: Short-term cash planning tools include preparation of a sales schedule, purchases schedule, wages and commissions schedule, and cash budget. a. True b. False

Q: Short-term financial planning forecasts address whether a venture is expected to generate the required cash to meet its coming obligations. a. True b. False

Q: The sum of the inventory-to-sale conversion period and the purchase-to-payment conversion period minus the sale-to-cash conversion period is called the cash conversion cycle. a. True b. False

Q: Conversion period ratios show the average time in days it takes to convert certain current assets and current liabilities into cash. a. True b. False

Q: Due to the difficulty of projecting financial statements for a young firm, short-term financial forecasts are never required of early-stage ventures. a. True b. False

Q: Most initial business plans contain monthly projected (pro forma) financial statements for at least one year, and sometimes for two or more years. a. True b. False

Q: A common way to express a venture's anticipated cash needs is to project the balance sheet and income statement into the future and produce the statement of cash flows. a. True b. False

Q: A venture's cash conversion cycle will decrease if the purchase-to-payment conversion period increases. a. True b. False

Q: The cash conversion cycle is the amount of time taken to buy materials and produce a finished good plus the time needed to collect sales made on credit minus the time taken to pay suppliers for purchases on credit. a. True b. False

Q: Short-term financial planning is critical during the survival stage because operations not yet turning a profit and the associated cash burn often lead to a venture's inability to pay its maturing liabilities. a. True b. False

Q: The cash conversion cycle measures the time it takes to pay off the principal on a loan. a. True b. False

Q: Early-stage ventures are defined as firms that are only operating in either their development or startup stages. a. True b. False

Q: The actions of monitoring financial performance, projecting cash needs, and obtaining first-round financing occurs during a venture's survival stage. a. True b. False

Q: Seed financing usually occurs during a venture's development life cycle stage. a. True b. False

Q: Indicate whether the statement is true or false.Short-term financial planning typically involves preparing monthly financial statements and focuses on identifying and planning for net income demands on the business.a. Trueb. False

Q: Following is financial statement information for Rogex Corporation: cash = $242; accounts receivable = $850; inventory = $820; net fixed assets = $3,408; accounts payable = $700; short-term notes payable = $740; long-term liabilities = $1,100; common stock = $1,160; retained earnings = $1,620; net sales = $2,768; cost of goods sold = $1,210; depreciation = $360; interest expense = $160; taxes = $312; addition to retained earnings = $508; and dividends paid = $218.What is Rogex's return on total assets? a. 9.6% b. 13.6% c. 19.1% d. 37.9%

Q: The entrepreneur, business angels, and VCs are important users of financial ratios and measures during which of the following life cycle stages? a. development and startup stages b. survival and rapid-growth stages c. development, startup, and rapid-growth stages d. development, startup, survival, and rapid-growth stages

Q: Following is financial statement information for Rogex Corporation: net sales = $2,768; cost of goods sold = $1,210; depreciation = $360; interest expense = $160; taxes = $312; addition to retained earnings = $508; and dividends paid = $218. What is the gross profit margin for Rogex? a. 26.2% b. 30.3% c. 43.3% d. 56.3%

Q: The type of financing used during the rapid-growth life cycle stage includes: a. second-round financing b. mezzanine financing c. liquidity-stage financing d. all of these choices

Q: Use the following information to determine a firm's cash build: net sales = $150,000; net income = $15,000; beginning-of-period accounts receivable = $60,000; end-of-period accounts receivable = $90,000; and interest = $10,000. a. $15,000 b. $30,000 c. $60,000 d. $120,000

Q: Investment bankers and commercial banks are important users of financial ratios and measures during which of the following life cycle stages? a. development stage b. startup stage c. survival stage d. rapid-growth stage

Q: Last year, Nemo's Fish 'n Chips recorded the following financial data: sales = $85,000; cost of goods sold = $45,000; selling and administrative expenses = $25,000; depreciation and amortization = $7,000; and interest expense = $12,000. The tax rate was 30%. Find Nemo's interest coverage for last year. a. 0.29 times b. 0.66 times c. 0.86 times d. 1.25 times

Q: Investment bankers often play an important role in which of the following life cycle stages? a. development stage b. startup stage c. survival stage d. rapid-growth stage

Q: Which of the following is used to examine a venture's performance over time? a. qualitative analysis b. trend analysis c. cross-sectional analysis d. industry comparable analysis

Q: The term "cash build" is measured as: a. net income plus depreciation b. net sales minus expenses minus (plus) an increase (decrease) in inventories c. net sales minus (plus) an increase (decrease) in receivables d. net income plus depreciation minus (plus) an increase (decrease) in payables

Q: Which of the following ratios is computed by dividing the average total assets by the average owners' equity? a. equity multiplier b. debt-to-equity ratio c. current liabilities-to-total-debt ratio d. current ratio

Q: Which of the following ratios is calculated as (Average Current Assets Average Inventories) Average Current Liabilities? a. current ratio b. quick ratio c. net-working-capital ratio d. current liabilities-to-total-debt ratio

Q: Last year, Lenny's Lemonade had $3,500 in sales, and cost of goods sold was $2,000. Depreciation expenses totaled $500, and interest expense was $700. If the tax rate is 25%, what is its NOPAT margin? a. 11.86% b. 21.43% c. 26.57% d. 29.14%

Q: Which of the following is not an efficiency and return measure? a. sales-to-total-assets ratio b. return on equity c. return on assets d. inventory-to-total-assets ratio

Q: First-round financing occurs primarily during which of the following life cycle stages? a. development stage b. startup stage c. survival stage d. rapid-growth stage

Q: Which of the following is used to compare a venture's performance against the average performance of other firms in the same industry? a. qualitative analysis b. trend analysis c. cross-sectional analysis d. industry comparable analysis

Q: Using the following information, determine the average monthly net cash burn rate: annual net income = $20,000; annual interest = $10,000; annual cash build = $150,000; and annual cash burn = $186,000. a. $1,000 b. $3,000 c. $4,000 d. $6,000

Q: Net sales minus cost of goods sold when divided by sales is called: a. gross profit margin b. operating profit margin c. net profit margin d. net operating profit after taxes margin

Q: A firm has the following balance sheet information: total assets = $100,000; current assets = $30,000; inventories = $10,000; cash = $5,000; total liabilities = $30,000; current liabilities = $15,000; and notes payable = $2,000. What is the firm's net-working-capital-to-total-assets ratio? a. 0.11 b. 0.13 c. 0.15 d. 0.17

Q: The difference between a venture's ability to generate cash to pay interest and the amount of interest it has to pay is determined by which of the following ratios? a. fixed-charges coverage b. debt-to-equity ratio c. equity multiplier d. interest coverage

Q: How is net cash burn calculated? a. Net Cash Burn = Cash Burn + Cash Build b. Net Cash Burn = Cash Build Cash Burn c. Net Cash Burn = Cash Burn Cash Build d. Net Cash Burn = Cash Burn Cash Build2

Q: Which of the following is not a basic ratio technique used to conduct financial analysis? a. trend analysis b. sensitivity analysis c. cross-sectional analysis d. industry comparable analysis

Q: Net income divided by net sales is the calculation for: a. net operating profit after taxes margin b. net profit margin c. operating profit margin d. gross profit margin

Q: Which of the following statements is true? a. ROA is always greater than or equal to ROE b. an increase in the asset turnover ratio implies a decrease in the asset intensity ratio c. ROE measures the return on the enterprise d. ROA measures the return on fixed assets

Q: Cash burn, liquidity, and conversion ratios are important during the development and startup life cycle stages.a. Trueb. False

Q: Cross-sectional analysis is used to examine a venture's performance over time. a. True b. False

Q: Net working capital reflects current assets deducted from current liabilities. a. True b. False