(1) A firm has accounts receivable of $50 million and sales of $250 million per year. What is the collection period in days?
(2) A member of your management team says he has reduced the collection period from 73 days to 50 days. Did this hurt or help the company?
(3) High technology industries like biotechnology and software companies always have higher ROIC’s and ROE’s than “low” technology firms like retail clothing, restaurants and theaters because they are, after all, high technology ?
True False
(4) The following are “discovery skills”:
(A) Risk management
(B) Project management
(C) Experimenting
(D) Porter’s 5 forces
(E) Hedging
(5) Strategy, as we discussed it, is most about (circle all that apply):
(A) Choosing what to focus on
(B) Integrating the activities of the firm
(C) Determining the optimal debt-to-equity ratio of the firm
(D) Determining how to finance a new project
(E) Hedging
(6) Net income of an industry can be expected to be LOWER if the following are true (circle all that apply) :
(A) The power of suppliers is low
(B) The power of customers is high
(C) There are low barriers to entry
(D) Substitutes are not a threat
(7) A reason why a firm should take on debt is to (circle all that apply) :
(A) Borrowing money always makes sense
(B) The interest rate on debt is lower than the expected return on projects you are financing
(C) It is always good to finance by a mixture of debt and equity
(D) None of the above
(8) What exists between industries in a value chain (circle all that apply) ?
(A) Bond markets
(B) Markets for initial public offerings
(C) Equity markets
(D) Markets setting the price of a product supplied to the next industry in the chain
(9 ) If you are run a manufacturing plant that buys rare earth metals to make semiconductors. Are you long or short rare earth metals ?
(A) Long
(B) Short
(C) Both
(D) Neither
(10) If you are long something, in order to hedge what should you do ?
(A) Go long something else
(B) Go short something else
(11) Your company is considering purchasing another company for $10 million. The present value of the cash flow from the company is projected by your staff to be $9 million. You believe you can even further improve the profitability of the company buy reducing the annual costs of the company by $1 million per year for the next 10 years. You have alternative investments available to you that earn 10% returns. What is the NPV of this purchase?