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Exam 5: Evaluating Operating and Financial Performance

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Question 21

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Trend analysis is used to examine a venture's performance over time.

A) True
B) False

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Question 22

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How is net cash burn calculated?

A) Net Cash Burn = Cash Burn + Cash Build
B) Net Cash Burn = Cash Build - Cash Burn
C) Net Cash Burn = Cash Burn - Cash Build
D) Net Cash Burn = Cash Burn - Cash Build²

E) C) and D)
F) A) and B)

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Question 23

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The part of a venture's interest payment that is subsidized by the government because of the deductibility of interest is called the interest tax shield.

Last year, Nemo's Fish 'n Chips recorded the following financial data: sales = $85,000; cost of goods sold = $45,000; selling and administrative expenses = $25,000; depreciation and amortization = $7,000; and interest expense = $12,000. The tax rate was 30%. Find Nemo's interest coverage for last year.

Which of the following ratios is computed by dividing the average total assets by the average owners' equity?

The current ratio and the quick ratio differ only because average inventories are subtracted in the numerator of the quick ratio.

Second-round, mezzanine, and liquidity-stage financing generally occur during a venture's survival stage.

Which of the following is used to examine a venture's performance over time?

Which of the following is used to compare a venture's performance against the average performance of other firms in the same industry?

Following is financial statement information for Rogex Corporation: net sales = $2,768; cost of goods sold = $1,210; depreciation = $360; interest expense = $160; taxes = $312; addition to retained earnings = $508; and dividends paid = $218. What is the net profit margin for Rogex?

Investment bankers and commercial banks are important users of financial ratios and measures during which of the following life cycle stages?

The entrepreneur, business angels, and VCs are important users of financial ratios and measures during which of the following life cycle stages?

Financial ratios are a useful way to summarize large amounts of financial data to simplify comparisons of a venture's performance with itself and other firms over time.

Net income divided by net sales is the calculation for:

During the development and startup stages of a venture's life cycle, important financial ratios and measures include cash burn rates and liquidity ratios.

Following is financial statement information for Rogex Corporation: net sales = $2,768; cost of goods sold = $1,210; depreciation = $360; interest expense = $160; taxes = $312; addition to retained earnings = $508; and dividends paid = $218. What is the operating profit margin for Rogex?

Using the following information, determine the average monthly net cash burn rate: annual net income = $20,000; annual interest = $10,000; annual cash build = $150,000; and annual cash burn = $186,000.

For a venture with inventories, the quick ratio will always be greater than the current ratio.

Accounting rules require that the current maturities of long-term debt obligations be classified as short-term liabilities.

The equity multiplier is considered an efficiency ratio.