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V questions and answers verified 2024
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V's set #2 s86Which of the following factors is be the largest inhibitor to revenue growth of a
biotech company?
A) Falling interest rates
B) Increasing valuations of private corporations
C) Decreasing cash flows allocated to CAPEX
D) A slowdown of FDA approvals for new medical techniques
C) Decreasing cash flows allocated to CAPEX
Companies in the biotechnology industry require a significant amount of
capital as well as the reinvestment of current cash flows to develop new
medical technologies.
Firms that lack sufficient cash flows to spend on new capital projects are at
risk of not being able to grow their revenues.
Even if a biotechnology firm doesn't have the cash flows to use on CAPEX, it
could get funding from the issuance of securities in the private markets.
Falling interest rates and increasing valuations of private companies would
make it viable to issue new securities to increase revenue growth.
,The FDA not approving new medical techniques would likely decrease biotech
valuations. Although revenue growth may suffer, it's unlikely to have as
dramatic an impact as decreasing CAPEX.
A research analyst is comparing two companies that are similar in all
respects, except for their lease arrangements. Which of the following is a
characteristic of a company that has a finance lease rather than an operating
lease?
A) Lower income in earlier years, due to higher interest costs
B) Higher income in earlier years, due to lower interest costs
C) Lower income in earlier years, due to higher amortization costs
D) Higher income in earlier years, due to lower amortization costs
A) Lower income in earlier years, due to higher interest costs
CORRECT ANSWER CHOSEN
Finance lease expenses typically decline over the lease term since interest
expense will fall and amortization will remain constant. Operating lease
expenses will typically remain constant over the life of the lease. As a result,
companies with finance leases will have lower income in the earlier years.
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Which of the following figures will change when a company pays a stock
dividend?
A) Current assets
B) Working capital
C) Current liabilities
D) EPS
EPS
, CORRECT ANSWER CHOSEN
When a company pays a stock dividend (rather than a cash dividend),
additional shares of common stock are issued to existing shareholders. Net
income would be divided by this increased number of shares outstanding.
Earnings per share would decline. Current assets and current liabilities would
remain unchanged (no money has been paid out); therefore, working capital
remains unchanged.
An analyst is seeking information on insider sales. Which of the following
forms would be the best source for such information?
A) Form 4
B) Form 10-K
C) Form 10-Q
D) Form 13D
A) Form 4
Form 4 is filed by insiders of a corporation when they buy or sell shares of
their company. The form must be filed no later than 2 business day following
the transaction.
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