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CICC
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Questions in this quiz (107)
1What is the most important reason for banks to evaluate the corporate governance process of their borrowers?
- AThe success or failure of the process can impact management risk
- BBanks needs to demonstrate due diligence in the review process
- CAn evaluation of corporate governance is required by Basel II
- DIt is part of the bank's commercial lending process
2The credit department is not concerned about how loans are priced, because that is the job of the sales department.
- ATrue
- BFalse
3The durations of a bank's assets and liabilities are mismatched leaving the bank exposed to changes in interest rates. This is an example of what type of bank risk?
- ACyber risk
- BMarket risk
- CLiquidity risk
- DCredit risk
4An organic vegetable grower uses the latest in non-chemical processes. They have requested financing with a lien over the assets of the company. What is your first step in analysing environmental risk?
- AThe business does not use toxic materials, so no review of environmental risk is required
- BEvaluate the liquidity and solvency of the business
- CDesign a loan structure that will protect the bank from clean-up costs
- DEvaluate the regulatory environment of the business
5Adjusting the bank's risk profile as a defensive measure in advance of an expected stress situation is an example of which credit portfolio management objective?
- AOptimization of the risk-return ratio
- BReduction of credit concentration risk
- CReduction of credit risk
- DEmployment of sensitivity stress-testing
6What is a characteristic of good collateral?
- AIt must be a property
- BIt must be valuable, on a standalone basis, independent of the business
- CIt may be illiquid
- DIt must be valuable to the business only
7What two simultaneous conditions would lead to a credit decision of bias to fail?
1. Pass solvency test
2. Fail liquidity test
3. Pass liquidity test
4. Fail solvency test- A1 & 3
- B1 & 2
- C2 & 4
- D3 & 4
8What is an example of Tier 2 capital?
- APreferred stock (preference shares)
- BHybrid debt-equity instruments
- COrdinary shares (common stock)
- DRetained profits
9Calculate a transactions economic profit based on the following information:
Revenue $80,000
Operating Costs $15,000
Expected loss $4,500
Taxes $5,000
Capital allocated $100,000
Weighted Average Cost of Capital 4.5%- A$42,750
- B$51,000
- C$50,250
- D$48,000
10What is the first stage in the management cycle?
- ADevelop plans
- BAssess business needs
- CAggregate and organize resources
- DSet goals
11Which item is NOT a valid reason for lenders to use credit agency reports?
- AA business's credit history is an important indication of management integrity
- BThe information includes the borrower's payment history
- CThe information includes 100% of the business's suppliers
- DHistoric payment records and reputation are objective
12If unseasonal weather patterns delay the harvesting of a crop by a few weeks, what impact is this liekly to have on a farmer's financing needs?
- AThere will be little or no change in financing requirements, as the farmer can delay making other payments until the crop is harvested
- BIf the delay means that the farmer is able to get a better price for his crops, then sales and profitability will increase and financing needs will be lower
- CThey are likely to increase, but not by much as most outgoings would have been incurred earlier in the season
- DThey will increase significantly, as further expenses will be incurred and higher interest will be charged on borrowings
13What can you conclude if the UCA cash flow statement of a business shows negative cash flow from operations?
- AThe business generated sufficient cash flow to cover all, or a portion of, its cash interest expense
- BThe business generated sufficient cash to cover its financing costs, interest, dividends, and scheduled debt repayments.
- CThe business generated sufficient cash to cover its financing costs of interests and dividends
- DThe business did not generate sufficient cash flow from operations to cover its cash interest expense.
14Who is in the best position to identify problem loans early?
- AThe working department
- BThe legal department
- CThe credit officer
- DRelationship managers
15Monitoring risk-adjusted return indicators and replacing credits that have a poor risk-return profile with credits that have a better ratio is an example of which credit portfolio management objective?
- AEmployment of sensitivity stress-testing
- BOptimization of the risk-return ratio
- CReduction of credit concentration risk
- DReduction of credit risk
16What value would be added by a guarantee from the owners of a limited liability company when assessing the credit risk of a loan request?
- ANone, as the owners are personally liable for the debts of the business, and their personal assets might not be sufficient to settle all amounts due.
- BThe value added would depend on whether the owners were prepared to sign a joint and several guarantee.
- CIt would add value only if the guarantors supported the guarantee by giving the bank a collateral interest in their personal assets.
- DIt may strengthen the case, as the owners have a personal interest in making sure that the business does well and is able to meets its obligations.
17FYE1:
Net Sales $5,000,000
COGS $2,500,000
FYE 2:
Net Sales $6,000,000
COGS $3,100,000
If you calculate the gross margin, what is the appropriate rationale for the year-over-year change?- AThe business increased production by paying its employees to work overtime shifts.
- BThe business automated its production process.
- CThe economy entered a recession, and the resulting effect on profit and cost of goods sold offset each other.
- DThe economy entered an inflationary period, where increasing prices and costs move in tandem.
18What is the appropriate level of communication to a stakeholder in a restructure situation where the importance of the issue is high, and the stakeholder influence is high?
- AShare highlights and exception reports; give regular updates.
- BReport non-sensitive information on an ad-hoc basis.
- CFull disclosure of all the information, all the time.
- DCommunicate objectives; report milestones; advise successful completion.
19When would it be acceptable for a lender to create a provision on a loan outstanding?
- AAs soon as the loan becomes 90 days overdue.
- BAs soon as default has occurred.
- CWhen the fair value of the collateral held is significantly greater than the book value of the debt.
- DWhen it becomes likely that some or all of a loan outstanding will not be repaid.
20Although the Basel Accord recommendations carry no legal force, what is the expectation?
- AThat each bank will decide which rules to implement.
- BThat national authorities will choose which rules to adopt.
- CThat the Bretton Woods system will continue to prevail.
- DThat national authorities will adopt the recommendations into local law
21The allowance for doubtful accounts on a bank's balance sheet is more commonly known as what?
- ACredit loss allowance
- BContingent liability
- CThe cost of funds
- DPrepaid expenses
22FYE 1:
Net Sales $4,000,000
Cost of Goods Sold $2,000,000
FYE 2:
Net Sales $5,000,000
Cost of Goods Sold $2,200,000.
If you calculate the gross margin, what is the appropriate rationale for the year-over-year change?- AThe business automated its production process.
- BThe economy entered an inflationary period, where increasing prices and costs move in tandem.
- CThe economy entered a recession, and the resulting effect on profit and cost of goods sold offset each other
- DThe business increased production by paying its employees to work overtime shifts.
23For a lender, what is an advantage of accepting marketable securities held in account as collateral?
- AThey might not be marketable.
- BTheir liquidity might diminish rapidly in times of stress.
- CSome types of securities can be immediately convertible into cash.
- DThey have a realizable value could be quite different from their original value.
24What would suggest that one or more managers in a business are suffering from position overload?
- AManagers regularly covering for positions that are currently vacant.
- BManagers in a small business who have responsibility for more than one functional area
- CA pyramidal organisation structure with a CEO at the apex.
- DThe use of outside resources such as tax specialists and consultants.
25What is the most appropriate covenant to apply when the primary credit risk is the high level of salaries the owners draw from the business?
- AMaximum debt/worth ratio.
- BGuarantees from the owners.
- CMinimum gross profit margin percentage.
- DKey person insurance.
26What is an example of non-core Tier 1 capital?
- APreferred stock (preference shares)
- BRetained profits
- CStock options
- DOrdinary shares (common stock)
27To best achieve their strategic objectives, a bank should establish their risk appetite using which approach?
- AThe CEO dictates the risk appetite.
- BThe CEO, CRO, and CFO develop the risk appetite in collaboration.
- CSenior management develops the risk appetite.
- DDevelopment of the risk appetite includes involvement from executive and senior management.
28Realistic liquidation values for various types of collateral can be difficult to determine. What is the primary consideration when valuing accounts receivable?
- AQuality of accounts receivable.
- BNumber of customer accounts.
- CDollar amount of accounts receivable.
- DCredit terms given to customers.
29Why might a business in a low-risk industry be considered a high credit risk?
- AThe business is growing and remains profitable, but needs an increasing level of credit facilities to support the increase in receivables and inventory.
- BIt is growing sales and profits but not market share.
- CManagement is falling behind some of its competitors in addressing current drivers of change within the industry.
- DThe business has reached maturity in its own life cycle, and transitional strategies are in place.
30What is NOT a component of the bank's balance sheet?
- AStakeholders (owners) Equity
- BLiabilities
- CFixed assets
- DAssets
31What is the advantage of choosing to restructure through a judicial process rather than an out-of-court consensual process?
- AControl of the process may pass to the court.
- BThe judicial process tends to be expensive.
- CThe judicial process is considered to be less flexible.
- DOn emergence, a company can be restructured as a new company.
32What is the likely impact on a business when a slowing of demand is combined with an increase in the number of competitors?
- AProduct prices will fall, but it is likely that the lower prices will allow the business to increase sales volumes and keep sales and profits at the same level.
- BSales growth is likely to continue, but profitability will be unchanged.
- CProfitability and cash flow are likely to be adversely affected.
- DCash flow will decline, but profit margins are likely to be maintained at similar levels as previously.
33What should a credit analyst look for when assessing the vulnerability of a business's sales to client concentration risk?
- AThe proportion of sales and purchases that are made with the business's top customer and supplier
- BThe percentage of sales and purchases made with a business's top ten customers and suppliers.
- CThe percentage of sales that are made to each of the business's top three customers.
- DWhat proportion of purchases are obtained from the business's largest supplier.
34What standards are covered by the second pillar of the Basel II accord?
- ABank transparency in disclosure of capital exposures.
- BBank transparency in disclosure of risk expenses.
- CMethodology and guidelines covering the calculation of minimum capital requirements.
- DRisk management guidance and supervisory transparency.
35Who is responsible for cyber risk? Select all that apply.
I. The bank's employees
II. The bank's management
III. The bank's customers
IV. The bank's CEO alone- AI & II
- BIV
- CI, II, & III
- DII
36Which of the following might increase management risk?
- AAcquiring a major competitor.
- BThe CEO delegating duties to middle management.
- CSeeking feedback on the business plan from suppliers.
- DTraining management on the how to manage employee relations.
37Which bank risk is the risk of collapse of an entire financial system or market?
- ACyber risk
- BSystemic risk
- CCredit risk
- DMarket risk
38Which risk affects the bank's ability or inability to manage unforeseen changes in its funding sources?
- AMarket risk
- BSystemic risk
- COperational risk
- DLiquidity risk
39What is the legal structure of a business with the following characteristics?
- More than one owner
- No separate tax return is filed for the business
- Limited life- ARetailer
- BCorporation
- CPartnership
- DSole Trader
40Intangible Assets $1,250,000
Total Liabilities $5,320,000
Total Net Worth $3,000,000.
If you calculate leverage, what is its impact on financial risk?- AFinancial risk is low and favorable.
- BFinancial risk is very unfavorable.
- CFinancial risk is at a moderate level.
- DFinancial risk is very favorable.
41What can you conclude if the UCA cash flow statement of a business shows a year-over-year cash outflow for the accounts receivables balance sheet change?
- AThe business did not generate sufficient cash flow from operations to cover its cash interest expense.
- BThe business generated sufficient cash to cover its financing costs of interest, dividends and scheduled debt payments.
- CAccounts receivable in year one is greater than accounts receivable in year two.
- DAccounts receivable in year one is less than accounts receivable in year two.
42What is the third step in developing an action plan for the restructuring of a company?
- AMake sure the road map and structure are consistent with the other steps.
- BDetermine the company's right to exist.
- CDetermine whether the stakeholders are willing to participate in a solution.
- DBuild a credible plan.
43Calculate a bank's RAROC (rounded to one decimal place) based on:
Revenue 80,000
Operating costs 16,000
Expected loss 3,000
Taxes 10,000
Income from capital 3,500
Capital 225,000.- A25.40%
- B27.60%
- C26.00%
- D24.20%
44The government has announced new lower levels of permitted emissions from oil and chemical production plants, which must be fully implemented within three years. What impact is this likely to have on oil and chemical business performance in the next 1-2 years?
- ACompany performance is likely to be moderately affected, if it makes initial capital investments to meet the new standards and starts building up staff levels to monitor compliance.
- BVery little, as oil and chemical companies have three years to fully implement the new tougher emission standards.
- CSignificant investments in new equipment to meet the new standards and support staff to monitor compliance is likely to have a substantial impact on performance.
- DThere will be negligible impact on performance, as significant capital expenditures are unlikely to be needed and additional staff do not need to be put in place until year three.
45What liability might a lender have when lending to a customer who has exposure to environmental risk, and why?
- ANone: Any potential liabilities can be mitigated by taking out insurance.
- BNone: The lender is exposed only to the credit risk that the borrower might not make loan and interest payments.
- CVery little: Potential environmental risks can be mitigated either by taking out insurance, putting in place adequate covenants, or through other means.
- DIt would depend on the nature of the credit facilities provided, but a lender's liability can extend beyond the loss of principal and interest as a result of its customer's exposure to environmental risk.
46What standards are covered by the third pillar of the Basel II accord?
- ARisk management guidance and supervisory transparency.
- BIntroduction of a global liquidity standard based on the liquidity coverage ratio.
- CBank transparency in disclosure of capital exposures.
- DMethodology and guidelines covering the calculation of minimum capital requirements.
47What is the advantage of choosing to restructure through a judicial process rather than an out-of-court consensual process.
- AThe judicial process tends to be expensive.
- BThe judicial process is considered to be less flexible.
- CMany legal regimes impose a standstill on creditors.
- DControl of the process may pass to the court.
48What risk weight did Basel I assign to loans fully secured by mortgages on owner-occupied residential property?
- A50%
- B20%
- C100%
- D0%
49Calculate a bank's RAROC (rounded to one decimal place) based on:
Revenue of $90,000
Operating costs of $20,000
Expected loss of $5,000
Taxes of $15,000
Income from capital of $4,500
Capital of $210,000.- A23.00%
- B25.95%
- C23.50%
- D22.50%
50Calculate the expected loss for an asset of a bank that has a probability of default of 50%, a loss given default of 25%, and an exposure at default of $100,000.
- A$75,000
- B$5,000
- C$12,500
- D$10,000
51Intangible Assets $125,000
Total Liabilities $2,000,000
Total Net Worth $6,250,000.
If you calculate leverage, what is its impact on financial risk?- AFinancial risk is low and favorable.
- BFinancial risk is very unfavorable
- CFinancial risk is at a moderate level
- DFinancial risk is very favorable.
52A company is in what critical stage of deterioration if their management activities include cutting R&D expenses, tightening the collection of accounts receivables, and reducing capital expenditures?
- ACash crisis
- BCash surplus
- CCash crunch
- DCash concern
53Which covenant would provide the most appropriate protection against loan loss in the case of a borrower who requires annual maintenance capital expenditures of $2,000,000 to keep its complex equipment operating?
- ARestrict payment of dividends.
- BRequirement to maintain a current ratio not less than 1.50
- CImpose a cap of $1,000,000 on capital expenditures
- DImpose a cap of $2,000,000 on capital expenditures.
54Why is the loan-to-value ratio important to lending institutions?
- ALenders have specific policies on advance rates.
- BLoan-to-value ratios fluctuate with market forces and therefore are estimates.
- CLoan-to-value measures the cushion between the loan amount and the collateral valuation.
- DLow loan-to value ratios are better than high loan-to-value ratios
55What happens when a potential borrower passes both the solvency and liquidity tests?
- ANo further assessment is necessary because the loan is declined.
- BThe credit risk assessment continues.
- CThere is a bias to fail and decline the loan.
- DThere is a bias to pass and continue the risk assessment.
56What action can be taken to address the potential impact of external market factors on a customer's credit risk?
- AIncrease the pricing of the facilities.
- BDecline to provide the credit facilities.
- CUndertake a peer group comparison exercise.
- DEnhance the structural features of facilities provided.
57Review the financial information for CLT Company Ltd., listed below.
Fiscal Year Inventory Cost of Goods Sold (COGS) Depreciation in COGS Adjusted Sales
Yr 1 $300,000 $633,000 $55,000 $1,000,000
Yr 2 $300,000 $633,000 $ 20,000 $ 800,000
Yr 3 $200,000 $705,000 $50,000 $1,200,000
In summary, what happened to adjusted inventory days over the years, and what impact did this change have on cash flow, all other things being equal?
1. Positive impact on cash flow.
2. Negative impact on cash flow.
3. Adjusted inventory days increased. 4.
Adjusted inventory days decreased.- A2 & 3
- B2 & 4
- C1 & 4
- D1 & 3
58 What is the loan purpose when a business requests funds to take advantage of a favorable supplier's discount?
- ATo finance accounts payable.
- BTo finance property, plant, and equipment used in the production cycle.
- CTo finance inventory until it is sold and converted to cash.
- DTo finance a change in business ownership.
59A company is in what critical stage of deterioration if their current management activities include cutting dividends, eliminating the maintenance of fixed assets, and canceling capital expenditures?
- ACash concern
- BCash crunch
- CCash surplus
- DCash crisis
60What two simultaneous conditions would lead to a credit decision of bias to pass rather than a decision to fail?
1. Pass solvency test
2. Fail liquidity test
3. Pass liquidity test
4. Fail solvency test- A1 & 3
- B2 & 4
- C3 & 4
- D1 & 2
61What is the principal focus when assessing overall credit risk?
- AThe risk that principal and interest will be repaid when due
- BThe risk that principal will be repaid when due
- CThe risk the borrowed funds and interest due will be repaid at some point
- DThe risk that interest will be repaid in cash
62The liquidity test determined the ability of a business to generate sufficient cash from normal operations to cover all typical expenses, including scheduled principal and interest payments.
- ATrue
- BFalse
63What specific risk assessment category is included in those normally addressed in the credit risk assessment process?
- AAudit risk
- BOperational risk
- CGlobal risk
- DManagement risk
64On which set of activities does financial risk assessment focus?
- AFinancial statement and ratio analysis, industry and business risk analysis, and management analysis
- BFinancial statement and ratio analysis, cash flow analysis, and projections
- CIndustry and business risk analysis, management analysis, and projections
- DCash flow analysis, industry and business risk assessment, and management assessment.
65What is the first step in a traditional credit decision process (i.e., one that does not use an automated risk rating component)?
- APrepare a list of questions for, and interview the business's management
- BSpread the business's financial data
- CGather enough data to determine that the credit request and purpose fall within policy guidelines
- DReview and perform analysis on ratios and cash flow to arrive at a preliminary financial risk assessment.
66Industry and business risk is the risk that the competitive marketplace in which a business operates creates forces that cannot be readily managed and/or mitigated, and which could inhibit timely repayment of principal and interest.
- ATrue
- BFalse
67Which is NOT included in the commonly accepted drivers of a business's credit risk profile (risk/cash drivers)?
- AOperating expense percentage
- BA/P days
- CSales growth
- DNet profit
68A business's financial performance, as reflected through its financial accounts, can depend just as much on external market competitive factors as on management decisions and actions.
- ATrue
- BFalse
69If you fully understand the risk (cash) drivers and their implications for a business's creditworthiness, it is generally not necessary to analyze other elements of its financial performance.
- ATrue
- BFalse
70A major objective of financial analysis is to determine not only how a business achieved its results, but why it performed that way.
- ATrue
- BFalse
71Most lenders have policies limiting the granting of credit to service businesses because there is no inventory to take as security.
- ATrue
- BFalse
72Identify the basic business performed by a manufacturer
- ASell products directly to consumers
- BAdd value to a tangible product or natural resource
- CProvide a service to a business or consumer
- DRe-sell products to other businesses that then sell them to consumers
73Identify the basic business performed by a wholesaler
- ASell products to consumers
- BAdd value to a tangible product or natural resource
- CProvide a service to a business or consumer
- DRe-sell products to other businesses that then sell them to consumers
74A business's operations and industry are characterized by different levels of risk
- ATrue
- BFalse
75Identify that basic business performed by a retailer
- ASell products to consumers
- BAdd value to a tangible product or natural resource
- CProvide a service to a business or consumer
- DRe-sell products to other businesses that then sell them to consumers
76Identify the basic business performed by a service enterprise
- ASell products to consumers
- BAdd value to a tangible product or natural resource
- CProvide a service to a business or consumer
- DRe-sell products to other businesses that then sell them to consumers
77Your institutions's policy may restrict or avoid lending to complex or specialized businesses
- ATrue
- BFalse
78Identify the financing need that is NOT one of the seven typical borrowing purposes?
- AFinance a change in business ownership
- BFinance operating expenses until A/R are converted to cash
- CFinance inventory until it is converted to output, sales, and then cash
- DNone of the above
79The larger the financing gap in the trading cycle, the more external financing a business needs.
- ATrue
- BFalse
80A loan's real borrowing cause does not have an impact on the risk associated with the loan
- ATrue
- BFalse
81Which loan purpose might be deemed particularly risky?
- ALoans to finance the importing of a prescription drug not yet legal in your country
- BLoans to finance leveraged buyouts
- CLoans to fund the start-up of a research and development business
- DAll of the above
82Given the figures below, which of the following is the change in sales and sales growth (%) for FYE 2 compared to FYE 1?
Net Sales:
FYE 1 $12,500,885
FYE 2 $14,025,992
FYE 3 $13,745,473- A(280,519) and -2.0%
- B(1,525,107) and -12.2%
- C1,525,107 and 12.2%
- D1,244,588 and 9.9%
83Given the figures below, which of the following is the change in sales and sales growth (%) for FYE 3 compared to FYE 2?
Net Sales:
FYE 1 $12,500,885
FYE 2 $14,025,992
FYE 3 $13,745,473- A(280,519) and -2.0%
- B1,244,588 and 9.9%
- C1,525,107 and 12.2%
- D(1,244,588) and -9.9%
84How would sales growth best be classified in FYE 3 compared to FYE 2 in the figures below?
Net Sales:
FYE 1 $12,500,885
FYE 2 $14,025,992
FYE 3 $13,745,473- AStable
- BVery high
- CNegative
- DModerate
- EPositive
85How is short-term financial risk affected for a company if its sales drastically increase due to the departure of a major competitor?
- ANot affected
- BGets better
- CGets worse
- DNone of the above
86If sales decline in FYE 4, you would expect accounts receivable and inventory to increase.
- ATrue
- BFalse
87How would a decision to offer credit to more marginal customers likely affect sales growth for a business?
- ANo change
- BIncrease
- CDecrease
88Sales typically decline during a recession.
- ATrue
- BFalse
89How would short-term cash flow and net profit, respectively, be affected by a temporary decline in sales, assuming the company is able to reduce receivables and inventories in parallel with the sales decrease?
- ANegative impact on cash flow, positive impact on net profit
- BPositive impact on cash flow, no impact on net profit
- CPositive impact on cash flow, negative impact on net profit
- DNo impact on cash flow, no impact on net profit
- EPositive impact on cash flow, positive impact on net profit
90Given the figures below, what is the correct adjusted gross margin for FYE 2?
FYE 1:
Net Sales $12,500,885
COGS $7,713,188
Depreciation in COGS $0
FYE 2:
Net Sales $14,025,992
COGS $11,304,950
Depreciation in COGS $0
FYE 3:
Net Sales $13,745,473
COGS $10,831,433
Depreciation in COGS $0- A22.3%
- B21.2%
- C24.1%
- D19.4%
91Given the figures below, what is the correct adjusted gross margin for FYE 3?
FYE 1:
Net Sales $12,500,885
COGS $7,713,188
Depreciation in COGS $0
FYE 2:
Net Sales $14,025,992
COGS $11,304,950
Depreciation in COGS $0
FYE 3:
Net Sales $13,745,473
COGS $10,831,433
Depreciation in COGS $0- A21.2%
- B17.8%
- C22.3%
- D19.4%
92How would the adjusted gross margin best be classified in FYE 3 compared to FYE 2?
FYE 1:
Net Sales $12,500,885
COGS $7,713,188
Depreciation in COGS $0
FYE 2:
Net Sales $14,025,992
COGS $11,304,950
Depreciation in COGS $0
FYE 3:
Net Sales $13,745,473
COGS $10,831,433
Depreciation in COGS $0- AAbout the same
- BBetter in FYE 3 than in FYE 2
- CWeaker in FYE 3 than in FYE 2
93A higher gross margin means that more cash flow is available to the business, all other things being equal.
- ATrue
- BFalse
94How would a decision by a business to lower prices to generate more sales likely affect the gross margin?
- ANo change
- BIncrease
- CDecrease
95Economic influences that result in higher sales for the year will, by definition, also cause an increase in the gross margin.
- ATrue
- BFalse
96How is financial risk for your borrower impacted if a new competitor enters the market with a similar product that sells for a lower price, forcing your borrower to cut prices?
- ANot affected
- BGets better
- CGets worse
97If sales decline in FYE 4, you would expect COGS to increase
- ATrue
- BFalse
98How would leverage and cash flow, respectively, be affected by an increase in the gross margin, all other things being equal?
- ANegative impact on leverage, positive impact on cash flow
- BPositive impact on leverage, no impact on cash flow
- CPositive impact on leverage, negative impact on cash flow
- DNo impact on leverage, no impact on cash flow
- EPositive impact on leverage, positive impact on cash flow
99Given the figures below, what is the correct adjusted operating expense percentage for FYE 2?
FYE 1:
Net Sales $12,500,885
Operating Expenses $2,050,145
Depreciation in Oper Exp $0
FYE 2:
Net Sales $14,025,992
Operating Expenses $2,247,081
Depreciation in Oper Exp $45,000
FYE 3:
Net Sales $13,745,473
Operating Expenses $2,384,739
Depreciation in Oper Exp $75,000- A16.4%
- B16.8%
- C16.0%
- D15.7%
100Given the figures below, what is the correct adjusted operating expense percentage for FYE 3?
FYE 1:
Net Sales $12,500,885
Operating Expenses $2,050,145
Depreciation in Oper Exp $0
FYE 2:
Net Sales $14,025,992
Operating Expenses $2,247,081
Depreciation in Oper Exp $45,000
FYE 3:
Net Sales $13,745,473
Operating Expenses $2,384,739
Depreciation in Oper Exp $75,000- A17.3%
- B16.8%
- C15.7%
- D16.4%
101How would the adjusted operating expense percentage best be classified in FYE 3 compared to FYE 2?
FYE 1:
Net Sales $12,500,885
Operating Expenses $2,050,145
Depreciation in Oper Exp $0
FYE 2:
Net Sales $14,025,992
Operating Expenses $2,247,081
Depreciation in Oper Exp $45,000
FYE 3:
Net Sales $13,745,473
Operating Expenses $2,384,739
Depreciation in Oper Exp $75,000- AAbout the same
- BBetter in FYE 3 than in FYE 2
- CWeaker in FYE 3 than in FYE 2
102If a new competitor enters the market causing a decrease in sales, a business should trim fixed operating costs to keep costs in line with revenues
- ATrue
- BFalse
103In which industry would you typically expect to have the hihest operating expense percentage?
- AManufacturer
- BRetailer
- CService
104How would leverage and interest expenses, respectively, be affected by a decline in the operating expense percentage, all other things being equal?
- ANegative impact on leverage, negative impact on interest expenses
- BPositive impact on leverage, no impact on interest expenses
- CPositive impact on leverage, negative impact on interest expenses
- DNo impact on leverage, no impact on interest expenses
- EPositive impact on leverage, positive impact on interest expenses
105How is financial risk impacted if a business's operating expense percentage declines?
- ANot affected
- BGets better
- CGets worse
106How would a decision by a business to hire two new administrative personnel likely affect the operating expense percentage, all other things being equal?
- ANo change
- BIncrease
- CDecrease
107Higher wages for office staff will cause the operating expense percentage to increase, assuming no commensurate increase in the company's sales.
- ATrue
- BFalse
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- Description
- Finance Quiz on CICC, created by Jessie Burkholder on 04/09/2020.
- Author
- Jessie Burkholder
- Language
- English
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