IVY Software Corporate Finance / MBA Prepworks
Comprehensive Resource To Help You Ace 2026-2027
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!!
Current Update!!
1. Financial risk
- ANSWER the uncertainty associated with a company's ability to convert
operating income (Earnings Before Interest and Taxes) to a given level of earnings
per share, and as a result, a commensurate level of dividends per share
2. The most commonly used indicators for a firm's financial risk are
- ANSWER Capitalization ratios
3. Capital markets prefer - ANSWER a certain level of debt, which varies by
industry and company, in a firm's capital structure. Because earnings do not
have to be distributed over as large a number of shares of common stock,
earnings are higher per share in a capital structure where some debt is
present
4. Dilution - ANSWER the process by which a given level of earnings is spread
over a greater number of shares; Earnings which are more leveraged are less
dilute. Financial leverage and financial risk are opposite forces which exert
pressure on EPS and a share's market value.
,5. Debt can - ANSWER ordinarily be obtained more quickly than market-
supplied equity; Furthermore, cautious companies try to maintain additional debt
capacities for unexpected catastrophes
6. When financial climate is attractive - ANSWER Managers can always
restructure a firm's capitalization when A financial restructuring need not be
accompanied by an asset acquisition
7. A decision to acquire new assets must - ANSWER stand entirely on its own
merits, and must not be influenced in any way by financing opportunities which
exist
8. If only marginal financing opportunities are available - ANSWER an
investment which will add value to the firm should be financed
9. Resolution of an investment/capitalization issue typically follows this pattern
- ANSWER (1) from the realm of proposals an investment is chosen, (2) a
capitalization package for financing the investment is envisioned, (3) both are
considered together
10. Variables which are common to all investments
- ANSWER the size, duration, return, and timing of the return
11. Timing of payments
- ANSWER may be more important than the apparent returns. In every case,
with total returns being equal, the investment which provides cash flows sooner is
the superior choice; e. Flows which are received sooner can be put back to work
more quickly, and that is the basis for the notion that money has different value
over time
, 12. Investments should
- ANSWER always be evaluated on the basis of their cash flows. While a
company may invest in an asset to improve its earnings, assets are not purchased
with "earnings". Earnings are derived through accounting conventions, which as
you know, may differ among firms. Banks and creditors accept only cold, hard cash
13. Present value
- ANSWER Given the rate of return that I am confident can be otherwise
achieved, and a schedule of the payments that will accrue from this investment,
what amount of money received today would make me indifferent to accepting
the offer
14. Discount factor
- ANSWER calculating the present value, the rate of return that an individual is
certain can be achieved is used
15. Rule of 72
- ANSWER allows one to determine, in approximate terms, what combination
of interest rate and years will cause an investment to double
16. If a projected data item is subject to extreme uncertainty
- ANSWER project a most likely value rather than an extreme value, unless you
are piecing together a "best case" or "worst case" scenario
17. False assumptions
- ANSWER can be built on with great precision and result in poor pro formas.
dont confuse accuracy with precision. precision is much more important than
accuracy
18. false
- ANSWER the greater detail in pro forma, the greater its accuracy will be
Comprehensive Resource To Help You Ace 2026-2027
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!!
Current Update!!
1. Financial risk
- ANSWER the uncertainty associated with a company's ability to convert
operating income (Earnings Before Interest and Taxes) to a given level of earnings
per share, and as a result, a commensurate level of dividends per share
2. The most commonly used indicators for a firm's financial risk are
- ANSWER Capitalization ratios
3. Capital markets prefer - ANSWER a certain level of debt, which varies by
industry and company, in a firm's capital structure. Because earnings do not
have to be distributed over as large a number of shares of common stock,
earnings are higher per share in a capital structure where some debt is
present
4. Dilution - ANSWER the process by which a given level of earnings is spread
over a greater number of shares; Earnings which are more leveraged are less
dilute. Financial leverage and financial risk are opposite forces which exert
pressure on EPS and a share's market value.
,5. Debt can - ANSWER ordinarily be obtained more quickly than market-
supplied equity; Furthermore, cautious companies try to maintain additional debt
capacities for unexpected catastrophes
6. When financial climate is attractive - ANSWER Managers can always
restructure a firm's capitalization when A financial restructuring need not be
accompanied by an asset acquisition
7. A decision to acquire new assets must - ANSWER stand entirely on its own
merits, and must not be influenced in any way by financing opportunities which
exist
8. If only marginal financing opportunities are available - ANSWER an
investment which will add value to the firm should be financed
9. Resolution of an investment/capitalization issue typically follows this pattern
- ANSWER (1) from the realm of proposals an investment is chosen, (2) a
capitalization package for financing the investment is envisioned, (3) both are
considered together
10. Variables which are common to all investments
- ANSWER the size, duration, return, and timing of the return
11. Timing of payments
- ANSWER may be more important than the apparent returns. In every case,
with total returns being equal, the investment which provides cash flows sooner is
the superior choice; e. Flows which are received sooner can be put back to work
more quickly, and that is the basis for the notion that money has different value
over time
, 12. Investments should
- ANSWER always be evaluated on the basis of their cash flows. While a
company may invest in an asset to improve its earnings, assets are not purchased
with "earnings". Earnings are derived through accounting conventions, which as
you know, may differ among firms. Banks and creditors accept only cold, hard cash
13. Present value
- ANSWER Given the rate of return that I am confident can be otherwise
achieved, and a schedule of the payments that will accrue from this investment,
what amount of money received today would make me indifferent to accepting
the offer
14. Discount factor
- ANSWER calculating the present value, the rate of return that an individual is
certain can be achieved is used
15. Rule of 72
- ANSWER allows one to determine, in approximate terms, what combination
of interest rate and years will cause an investment to double
16. If a projected data item is subject to extreme uncertainty
- ANSWER project a most likely value rather than an extreme value, unless you
are piecing together a "best case" or "worst case" scenario
17. False assumptions
- ANSWER can be built on with great precision and result in poor pro formas.
dont confuse accuracy with precision. precision is much more important than
accuracy
18. false
- ANSWER the greater detail in pro forma, the greater its accuracy will be
