Sophia Finance Milestone 4_Complete Questions and Answers (Latest 2022/2023)

Sophia Finance Milestone 4 1 Which of the following is an example of an operational risk for a company that manufactures automobiles? Rising interest rates that affect the terms of car loans, thereby decreasing demand Damage to completed cars held on a storage lot A state tax increase that makes buying and registering a car more expensive A national car rental agency backing out of a contract to buy a certain volume of new cars CONCEPT Risk and Capital Budgeting 2 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 3 Seed money is a type of financing appropriate for a company in what stage of development? Growth Introduction Maturity Decline CONCEPT Types of Financing 4 Kiran needs additional short-term financing for his robotics company, so he asks his suppliers if they could issue a discount if he pays his bills early. What type of financing resource is Kiran using? Trade credit Barter Peer-to-peer lending Factoring CONCEPT Short-Term Financing 5 What can a business that has too little working capital do to increase it? Decrease inventory Increase short-term liabilities Reduce current assets Increase cash on hand CONCEPT Working Capital 6 An electronics company is preparing a capital budget and considering four long-term investments. The payback period of each project is as follows: Project A: 4 years Project B: 5.2 years Project C: 2.4 years Project D: 3 years In theory, which two projects should the company pursue? Projects C and D Projects A and C Projects B and D Projects A and B CONCEPT Introduction to Capital Budgeting 7 What is one potential advantage of being a privately-held company? A private company has access to less expensive sources of capital than a public company. Risk is spread among a larger pool of investors in a private company. If managers also own the company, they are strongly incentivized to succeed. If a company is private, it is better positioned to pursue acquisitions. CONCEPT Comparing Public and Private Financing 8 What does the residual dividend model mean for a company? It prioritizes the company's growth over shareholder dividends. It allows a company to maintain a consistent dividend yield. It helps a company attract investors who seek a high dividend payout ratio. It helps a company attract investors who seek a low dividend payout ratio. CONCEPT Setting the Dividend 9 When performing capital budgeting, cash flow analysis can help a company determine when to execute __________. depreciation taxes replacement projects sunk costs CONCEPT Cash Flow Analysis and Other Factors 10 Aneeka owns 40 shares of stock in Company A that are valued at $15/share. After Company A repurchases 5% of its outstanding shares on the open market, what does Aneeka own? 40 shares valued at a higher price/share 38 shares of stock valued at a higher price/share 38 shares of stock valued at a lower price/share 40 shares valued at a lower price/share CONCEPT Cash Dividend Alternatives 11 Which of the following is a disadvantage of venture capital? Venture capital investors may place restrictions on company operations, such as setting salary caps. Receiving venture capital can send a message to other investors that your company is unlikely to succeed. Venture capitalists only receive a return on their investment if the company is eventually purchased for a large sum. Companies that receive venture capital are prohibited from issuing an IPO once they become successful. CONCEPT Venture Capital 12 Which inventory technique is most useful when a business has inventory that varies greatly in value? LIFO Average cost FIFO ABC CONCEPT Inventory Management 13 Determine whether the following description is true of a capital lease, an operating lease, neither or b