CFC Capital Structure & Funding 3

Question 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?

Accepted Answer

$50,000,000

Answer

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

Question 2

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

Accepted Answer

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

Answer

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.

Question 3

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

Accepted Answer

Recognized at fair value on the acquisition date

Answer

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.

Question 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:

Accepted Answer

Pay a higher coupon rate due to greater default risk

Answer

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

Question 5

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

Accepted Answer

Private placement

Answer

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

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Capital Structure & Funding 3