Corporate Finance
Exam Questions
Course Introduction
Corporate Finance explores the fundamental principles and practices that guide financial decision-making within corporations. The course covers topics such as capital budgeting, risk analysis, capital structure, dividend policy, and the valuation of financial assets. Students learn how firms raise capital, invest in projects, manage financial risk, and maximize shareholder value through strategic financial planning. By examining real-world case studies and quantitative models, the course equips students with the analytical tools necessary to evaluate investment opportunities, assess financial performance, and make sound corporate finance decisions in a competitive business environment.
Recommended Textbook
Investment Banking Valuation Leveraged Buyouts and Mergers and Acquisitions by Joshua Rosenbaum
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7 Chapters
201 Verified Questions
201 Flashcards
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Page 2
Chapter 1: Comparable Companies Analysis
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) How should one adjust net income when using the If-Converted method for a comparable companies analysis?
A)Adjust net income downward
B)Adjust net income upward
C)Make no adjustment to net income
D)It depends
Answer: B
Q2) For what company would a valuation metric like EV / Sales be helpful?
A)A company with high gross margins
B)A company with no earnings
C)A company with low gross margins
D)A company with no debt
Answer: B
Q3) Which calculation measures the return generated by all capital provided to a company?
A)ROE
B)ROA
C)ROIC
D)ROI Answer: C
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Chapter 2: Precedent Transactions Analysis
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) Which form of consideration typically triggers a taxable event?
A)All-cash
B)Stock-for-Stock
C)Cash/stock mix
D)None
Answer: A
Q2) Which structure generally gives greater certainty to the target's shareholders in terms of value received?
A)Floating exchange ratio
B)Fixed exchange ratio
C)They both are the same
D)It depends on the terms
Answer: A
Q3) Which form contains relevant data for an LBO in a private transaction involving non-public financing?
A)S-4
B)8-K
C)13E-3
D)None of the above
Answer: D
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Chapter 3: Discounted Cash Flow Analysis
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) Which variable generally represents the majority of a DCF valuation?
A)CAPM
B)Beta
C)WAAC
D)Terminal value
Answer: D
Q2) When there are limited or no) pure play peer companies, which valuation method should be used?
A)Comparable companies analysis
B)Precedent transaction analysis
C)Vertical analysis
D)Discounted cash flow analysis
Answer: D
Q3) If a DCF is constructed on the basis of EBIT or EBITDA, what must be driven as a percentage of sales?
A)COGS
B)SG&A
C)Net working capital
D)D&A Answer: C
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Chapter 4: Leveraged Buyouts
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Sample Questions
Q1) Which of the following forms of financing tends to be the least flexible?
A)Bank debt
B)Mezzanine debt
C)Equity contribution
D)High yield bonds
Q2) A target was purchased for $1,500.0m with an equity contribution of $500.0m.By year 5 no debt has been repaid and enterprise value has grown by $500.0m.Assuming the sponsor sells the target for its enterprise value, what is the sponsor's cash return?
A)2x
B)3x
C)1x
D)5x
Q3) What can protect investors from having debt with an attractive yield refinanced before maturity?
A)Floating interest rate
B)Fixed interest rate
C)PIK
D)Call premium
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Chapter 5: Lbo Analysis
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Sample Questions
Q1) Given the following information, calculate the cash that will flow to the balance sheet, assuming a 100% cash flow sweep.
<u><b>Details:</b></u>
Free Cash Flow: $65.0m
TLB amortization: $5.0m
Optional debt repayment: $70.0m
A)$60.0m
B)$70.0m
C)$65.0m
D)$0.0
Q2) When preparing a pre-LBO model, the historical income statement is completed until what point?
A)Net income
B)Operating expenses
C)Interest expenses
D)EBIT
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Page 7
Chapter 6: Sell-Side Ma
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33 Flashcards
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Sample Questions
Q1) Which document has the purchase price details as well as the exact date and guidelines for an M&A process?
A)CIM
B)Bid procedures letter
C)Confidentiality agreement
D)Final bid procedures letter
Q2) Which of the buyers can limit the scope of their due diligence?
A)Financial sponsor
B)Strategic buyer
C)Direct competitor
D)They are all equal
Q3) Key conditions to signing and closing are found on which of the following documents?
A)CIM
B)Bid procedure letter
C)Teaser
D)Confidentiality agreement
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Chapter 7: Buy-Side Ma
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Sample Questions
Q1) If a merger or acquisition is not immediately accretive, should the acquirer go through with the transaction? Why or why not?
A)No, the transaction will dilute the EPS and destroy shareholder value
B)Yes, accretion/dilution is not important
C)It depends; expected synergies and growth prospects may make the deal accretive and therefore create shareholder value
D)No, once a deal is dilutive it cannot become accretive
Q2) If a computer manufacturer purchases a semiconductor company, what form of integration is this?
A)Horizontal integration
B)Vertical integration
C)Backward integration
D)Forward integration
Q3) Which form of integration expands an acquirer's geographic reach, product lines, services, or distribution channels?
A)Horizontal integration
B)Geographic integration
C)Vertical integration
D)Transitional integration
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Page 9