Bcom Bachelor of Commerce Corporate Finance & Financial Management 3

Question 1

Working capital is formally defined as:

Accepted Answer

Current assets minus current liabilities

Answer

Total assets minus total liabilities

Answer

Fixed assets minus long-term debt

Answer

Cash and marketable securities only

Question 2

The Cash Conversion Cycle (CCC) measures:

Accepted Answer

The time elapsed between paying for inventory and collecting cash from customers

Answer

How quickly a firm converts fixed assets into cash proceeds

Answer

The average age of accounts receivable only

Answer

The number of days it takes to convert equity to liquid cash

Question 3

A high Inventory Turnover ratio typically indicates that a company is:

Accepted Answer

Managing its inventory efficiently with fast-moving stock

Answer

Holding excessive levels of slow-moving inventory

Answer

Experiencing a significant decline in sales volume

Answer

Recording a continuously rising cost of goods sold trend

Question 4

The Price-to-Earnings (P/E) ratio is primarily used to:

Accepted Answer

Value a company's stock relative to its earnings per share

Answer

Measure a company's total debt burden relative to assets

Answer

Determine the exact dividend payment due to shareholders

Answer

Calculate the cost of equity under the CAPM model

Question 5

Enterprise Value (EV) is best calculated as:

Accepted Answer

Market capitalization plus net debt (debt minus cash)

Answer

Market capitalization alone

Answer

Total book assets minus total book liabilities

Answer

Share price multiplied by book value per share

Question 6

An aggressive working capital strategy is characterized by:

Accepted Answer

Financing long-term assets with short-term debt to reduce costs

Answer

Maintaining very high levels of current assets as a buffer

Answer

Adopting conservative inventory and receivables policies

Answer

Relying primarily on long-term debt and equity for all financing

Question 7

Which of the following is classified as a long-term source of finance?

Accepted Answer

Debentures issued by the company

Answer

Accounts payable to suppliers

Answer

Bank overdraft facility

Answer

Commercial paper issued in the money market