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Sophia
Principles of Finance
Milestone 4
1
What is one disadvantage of NPV as a capital budget method?
It can be misleading if inputs like cash flow turn out to be wrong.
It is rarely used, so there is disagreement as to what an adequate NPV is.
It cannot be used to compare investments with different upfront costs.
It does not deliver an overall picture of the gain or loss of implementing a project.
CONCEPT
Net Present Value
2
Select a reason why a company would want to go public.
To increase direct oversight from investors
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To decrease administrative costs
To consolidate control of the company in the hands of management
To have access to cheaper capital than a private company would
CONCEPT
Comparing Public and Private Financing
3
A company with a 120-day operating cycle determines its cash conversion cycle using the
following data:
Receivable days: 35
Inventory days: 95
Payable days: 45
What is the company's cash conversion cycle?
105
75
25
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165
CONCEPT
Cash Conversion Cycle
4
Which of the following is a goal of working capital management?
To ensure liquidity and increase cash holding costs
To balance adequate cash flow against maximal returns
To lengthen the span of time between payment of accounts payable and collection of accounts
receivable
To minimize free working capital and maximize opportunity costs
CONCEPT
Working Capital Financing
5
What does the residual dividend model mean for investors?
They should expect to always receive very small dividends.
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Sophia
Principles of Finance
Milestone 4
1
What is one disadvantage of NPV as a capital budget method?
It can be misleading if inputs like cash flow turn out to be wrong.
It is rarely used, so there is disagreement as to what an adequate NPV is.
It cannot be used to compare investments with different upfront costs.
It does not deliver an overall picture of the gain or loss of implementing a project.
CONCEPT
Net Present Value
2
Select a reason why a company would want to go public.
To increase direct oversight from investors
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Distribution of this document is illegal
, Stuvia.com - The Marketplace to Buy and Sell your Study Material
To decrease administrative costs
To consolidate control of the company in the hands of management
To have access to cheaper capital than a private company would
CONCEPT
Comparing Public and Private Financing
3
A company with a 120-day operating cycle determines its cash conversion cycle using the
following data:
Receivable days: 35
Inventory days: 95
Payable days: 45
What is the company's cash conversion cycle?
105
75
25
Downloaded by: Ariah |
Distribution of this document is illegal
, Stuvia.com - The Marketplace to Buy and Sell your Study Material
165
CONCEPT
Cash Conversion Cycle
4
Which of the following is a goal of working capital management?
To ensure liquidity and increase cash holding costs
To balance adequate cash flow against maximal returns
To lengthen the span of time between payment of accounts payable and collection of accounts
receivable
To minimize free working capital and maximize opportunity costs
CONCEPT
Working Capital Financing
5
What does the residual dividend model mean for investors?
They should expect to always receive very small dividends.
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Distribution of this document is illegal
