Practice Test Geeks(CFC) Certified Financial Controller Practice Test
← All CFC Flashcard Decks

Capital Structure & Funding Flashcards

7 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Capital Structure & Funding flashcards as text

  1. A company's stock is currently trading at $40 per share with 1,000,000 shares outstanding. It has $10,000,000 in debt. What is the firm's enterprise value?

    Answer: $50,000,000

    Enterprise value = Market capitalization + Debt = (1,000,000 × $40) + $10,000,000 = $40,000,000 + $10,000,000 = $50,000,000.

  2. Which of the following is a characteristic of a revolving credit facility?

    Answer: Borrower can draw, repay, and re-borrow up to a set limit

    A revolving credit facility allows the borrower to draw funds, repay them, and borrow again up to the credit limit, providing flexible working capital access.

  3. Under SFAS 141R (ASC 805), how must contingent consideration in a business acquisition be recognized?

    Answer: Recognized at fair value on the acquisition date

    ASC 805 requires contingent consideration to be recognized at fair value on the acquisition date and remeasured at each reporting period with changes flowing through income.

  4. A firm with a BBB credit rating seeks to issue 10-year bonds. Compared to an A-rated issuer of similar bonds, the BBB issuer will most likely:

    Answer: Pay a higher coupon rate due to greater default risk

    Lower credit ratings signal higher default risk, requiring issuers to offer higher coupon rates (credit spreads) to attract investors.

  5. Which funding method allows a private company to raise capital from accredited investors without SEC registration under Regulation D?

    Answer: Private placement

    Regulation D private placements allow companies to raise capital from accredited investors without full SEC registration, reducing time and cost.

  6. Sale-leaseback transactions are primarily used by companies to:

    Answer: Convert fixed assets into liquidity while retaining operational use

    In a sale-leaseback, a company sells an asset to a buyer who then leases it back, converting illiquid fixed assets into cash while maintaining operational control.

  7. The optimal capital structure for a firm in a high-growth industry with volatile earnings is most likely characterized by:

    Answer: Lower debt levels to preserve financial flexibility

    High-growth firms with volatile earnings benefit from lower debt levels to maintain financial flexibility and avoid distress costs during earnings downturns.