Financial Feasibility Study: Conceptual Review

What is the difference between assets and investment capital?

• There is no difference; both terms are interchangeable.

• Assets are what the company owns, while investment capital is what investors finance.

• Assets may or may not generate income, while investment capital will always generate income.

• Assets are financed by liabilities, while investment capital is financed by equity.

What is the main purpose of reorganizing a balance sheet in financial management?

• To simplify the financial statements for tax purposes.

• To understand the roles of the financial manager better.

• To increase the company's market value.

• To decrease the company's liabilities.

According to Prof. Michael Porter’s Five Forces Framework, what is NOT a force that shapes industry competition?

• Bargaining power of buyers.

• Bargaining power of suppliers.

• Threat of new entrants.

• Technological advancements.

What is the primary focus of financial planning in a business plan?

• Determining the company's strategy.

• Creating pro-forma financial statements.

• Attracting appropriate talent.

• Determining the legal structure of the business.

In financial management, what does it mean if 'Assets (A) > Liabilities (L) + Equity (E)'?

• The company is in debt.

• The company is financially healthy.

• The company is growing too fast and cannot support the growth.

• The company's equity is negative.

What is a major difference between profit and cash flow?

• Profit is always higher than cash flow.

• Cash flow ignores investment, while profit does.

• There is no significant difference.

• Profit measures viability, while cash flow measures financial health.

What does 'Free Cash Flow' (FCF) represent in financial analysis?

• Total income generated by a business.

• The number of shares the company has available to trade in the market.

• What shareholders get to keep after paying appropriate taxes.

• Funds available for distribution to investors after expenses and investments.

What does the 'cost of capital' refer to?

• The total expenses incurred in a financial year.

• The interest payable on business loans.

• The returns required by investors for providing capital to a company.

• Operational costs of running a business.

Why is 'Return on Invested Capital' (ROIC) a significant metric?

• It provides insights into how the business is financed.

• It provides a strategic view of business profitability independent of financing decisions.

• It indicates the company's ability to repay debt.

• It only measures short-term profitability.

What is the purpose of conducting a breakeven analysis?

• To determine the company’s total revenue.

• To calculate the minimum sales volume needed to avoid a loss.

• To identify the most profitable product lines.

• To assess the impact of market competition.