Capstone Studies in Finance Mid Semester II Extra Practice Questions
1. Consider an LBO. The target is a basic manufacturing company. What is needed in order to complete the pro forma income statement from EBIT to net income
a. Balance Sheet
b. LIBOR curve
c. Debt schedule d. COGS
2. What is the main source of financing in a leveraged buyout?
a. Debt b. Equity c. Assets d. Cash
3. For what company would a valuation metric like EV / Sales be helpful?
a. A company with high gross margins b. A company with no earnings
c. A company with low gross margins d. A company with no debt
4. Which of the following is the correct code for generating a vector of numbers in Python?
a. Import Numpy as np numpy.array([1, 2, 3, 4, 5])
b. Import Numpy as np numpy.linspace(1, 10, 2)
c. Import Numpy as np np.array(1, 2, 3, 4, 5)
d. Import Numpy as np
np.arange(1, 10, 2)
5. Consider a LBO. Which of the following forms of financing tends to be the least flexible?
a. Bank debt
b. Mezzanine debt
c. Equity contribution d. High yield bonds
6. What happens to the enterprise value (EV) if a company issues equity and uses the proceeds to repay debt?
a. The EV goes up
b. The EV remains the same c. The EV goes down
d. It depends
7. In many instances, growth through acquisition is _________ than building a new business from scratch.
a. Cheaper
b. More time consuming
c. Faster
d. Both A and C
8. A good rule for effective presentation slides is:
a. Use complete sentences on the slides
b. Include all the information you will be referring to on the slides
c. Include a visual for every point to convey your message
d. Include clear points and relevant facts on the slides so that the focus is on you as the
speaker
9. The team gathers for the weekly progress about team objectives. What type of meeting best describes a cohesive team?
a. There is an open and realistic sharing of both progress and problems
b. Some team members restrain their remarks to avoid “rocking the boat”
c. Some team members seem to be involved in the discussion, while others do not
d. There are sub-groups within the team; Their concerns are not shared with others in the
team
10. Which of the following Python code correctly plots a line graph?
a. import matplotlib as plt x = [1, 2, 3, 4, 5]
y = [2, 4, 6, 8, 10] plt.plot(y, x)
plt.show()
b. from matplotlib.pyplot import plot
x = [1, 2, 3, 4, 5] y = [2, 4, 6, 8, 10] plot(x, y)
show()
c. import matplotlib.pyplot as plt x = [1, 2, 3, 4, 5]
y = [2, 4, 6, 8, 10]
pyplot(x, y)
plt.show()
d. import plotly.express as px
x = [1, 2, 3, 4, 5] y = [10, 8, 6, 4, 2]
fig = px.scatter(x=x, y=y) fig.show()
11. Which of the following is a good rule of thumb when giving a business presentation?
a. Keep your visual aids to a minimum and rely solely on your verbal delivery to convey your message.
b. Speak quickly to maintain your audience's engagement and cover all of your talking points within the allocated time.
c. It is acceptable to read from notes during an online presentation because it is not evident to the audience.
d. Use clear and concise language to communicate your message effectively, and avoid speaking in a monotone voice throughout the presentation.
12. Which of the following Category/Ratio pairs is incorrect?
a. Operating Performance b. Financial leverage
c. Debt service coverage d. Liquidity
13. Which is the best answer?
Current assets/Current liabilities LT Debt/Capitalization
(FCF – CAPEX)/Interest Inventory/Net sales
a. Growth synergy implies higher growth rate in revenue
b. Economies of scale synergy imply a larger firm has lower cost per unit. c. Financing synergy implies that a merger lowers the cost of capital
d. All of above
14. Which of the following is not a direct source of value in a merger?
a. Tax synergy
b. Better investment policy c. Diversification synergy d. Growth synergy
15. Which of the following statements is true about Moody's KMV model?
a. It is a financial valuation model that is commonly used to determine the value of publicly-traded companies.
b. It is a credit risk assessment model that uses equity share price to estimate a company's probability of default.
c. It is a market volatility model that predicts changes in stock prices based on changes in the overall market conditions.
d. It is a financial forecasting model that predicts changes in equity share price and based on historical trends.
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