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CHAPTER 8 - Quiz
Contributed by: Laong
  • 1. Why are finance and accounting important in strategy implementation?
A) They are only needed for reporting
B) Strategies succeed only if finances are managed well
C) Strategies can be implemented without them
D) They reduce competition
  • 2. Finance and accounting activities are considered ______ to strategy implementation.
A) Irrelevant
B) Secondary
C) Optional
D) Central
  • 3. Financial knowledge gives strategists a:
A) Legal advantage
B) Cultural advantage
C) Competitive advantage
D) Political advantage
  • 4. Capital structure refers to the:
A) Level of profits
B) Market value of stock
C) Amount of cash on hand
D) Mix of debt and equity
  • 5. EPS/EBIT analysis is used to:
A) Decide the best capital structure
B) Evaluate competitors
C) Forecast sales
D) Measure employee productivity
  • 6. EPS stands for:
A) Estimated Profit Share
B) Earnings Per Stock
C) Earnings Per Share
D) Equity Per Share
  • 7. EBIT means:
A) Earnings Before Income Taxes
B) Equity Before Interest and Taxes
C) Earnings After Taxes
D) Earnings Before Interest and Taxes
  • 8. EAT refers to:
A) Earnings After Taxes
B) Equity After Taxes
C) Earnings At Time
D) Earnings And Taxes
  • 9. Which is the first step in EPS/EBIT analysis?
A) Compute EPS
B) Graph EPS and EBIT
C) Calculate taxes
D) Gather input data
  • 10. In EPS/EBIT analysis, EBIT is plotted on the:
A) Horizontal bar
B) X-axis
C) Y-axis
D) Z-axis
  • 11. In EPS/EBIT analysis, EPS is plotted on the:
A) Z-axis
B) Horizontal bar
C) Y-axis
D) X-axis
  • 12. The best financing option is the one that:
A) Uses only equity
B) Avoids taxes
C) Has the lowest debt
D) Has the highest EPS for a given EBIT level
  • 13. A limitation of EPS/EBIT analysis is that it does not consider:
A) Net income
B) Interest expense
C) Control and flexibility
D) Tax rates
  • 14. Projected financial statements usually cover how many years?
A) 2 years
B) 5 years
C) 4 years
D) 3 years
  • 15. Which financial statement is projected first?
A) Cash Flow Statement
B) Balance Sheet
C) Income Statement
D) Statement of Retained Earnings
  • 16. The percentage-of-sales method is mainly used to project:
A) Assets only
B) Taxes only
C) COGS and operating expenses
D) Dividends only
  • 17. Retained earnings are calculated as:
A) EBIT − taxes
B) Sales − expenses
C) Net income + dividends
D) Net income − dividends
  • 18. In projected balance sheets, cash is often used as a:
A) Liability
B) Fixed value
C) Plug figure
D) Dividend
  • 19. Why are notes added to projected financial statements?
A) To calculate EPS
B) To explain assumptions and major changes
C) To hide losses
D) To increase length
  • 20. Corporate valuation is needed for all EXCEPT:
A) Divestitures
B) Daily operations
C) Acquisitions
D) Mergers
  • 21. Which valuation method uses stockholders’ equity minus goodwill and intangibles?
A) Net Income Method
B) Outstanding Shares Method
C) Net Worth Method
D) P/E Ratio Method
  • 22. The Net Income Method values a firm as
A) Net income × 5
B) Net income × 10
C) Net income ÷ EPS
D) Net income × stock price
  • 23. Market capitalization is calculated using:
A) Net income × 5
B) Assets − liabilities
C) EPS × P/E ratio
D) Number of shares × stock price
  • 24. Financial ratio analysis is important because it:
A) Eliminates risk
B) Predicts stock prices
C) Replaces financial statements
D) Tracks performance and identifies strengths and weaknesses
  • 25. An Initial Public Offering (IPO) occurs when a company:
A) Buys another firm
B) Sells stock to the public for the first time
C) Declares dividends
D) Issues bonds
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