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