MBA Finance 3

Question 1

What is 'leveraged buyout' (LBO)?

Accepted Answer

Acquiring a company primarily using borrowed funds

Answer

A company buying back its own shares

Answer

Issuing new equity to fund expansion

Answer

Merging two equal-sized companies

Question 2

Which valuation method estimates a company's value based on the present value of its future free cash flows?

Accepted Answer

Discounted Cash Flow (DCF) Analysis

Answer

Comparable Company Analysis

Answer

Precedent Transaction Analysis

Answer

Asset-Based Valuation

Question 3

What does 'accounts receivable turnover' measure?

Accepted Answer

How efficiently a company collects payment from customers

Answer

How quickly a company pays its suppliers

Answer

The ratio of credit sales to total sales

Answer

The average age of inventory

Question 4

What is the difference between systematic and unsystematic risk?

Accepted Answer

Systematic risk affects the whole market; unsystematic is company-specific and diversifiable

Answer

Systematic risk is company-specific; unsystematic is market-wide

Answer

Both types are equally diversifiable

Answer

Neither type can be reduced through diversification

Question 5

What is a 'sinking fund' in corporate finance?

Accepted Answer

A fund set aside to retire debt over time

Answer

A reserve fund for research and development

Answer

An emergency liquidity reserve

Answer

A fund to repurchase equity shares

Question 6

What does the term 'liquidity premium' refer to in fixed income investing?

Accepted Answer

The extra return required for holding a less liquid (harder to sell) security

Answer

The extra return demanded for holding a riskier bond

Answer

The penalty for early bond redemption

Answer

The difference between coupon rate and yield to maturity