Strategic Financial Management
Textbook Exam Questions
Course Introduction
Strategic Financial Management focuses on the application of financial principles and tools in shaping the long-term direction and competitiveness of an organization. The course integrates concepts of corporate finance, investment decisions, capital structure, risk management, and valuation with strategic planning and implementation. Students will analyze real-world scenarios to formulate financial strategies that maximize value, align with organizational goals, and respond to dynamic market environments. Emphasis is placed on critical thinking and problem-solving skills needed for effective financial leadership in both domestic and global contexts.
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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Sample Questions
Q1) Calculate the EBITDA margin given the following information.
\(\bullet\)EBITDA: $200.0m
\(\bullet\)COGS: $200.0m
\(\bullet\)Sales: $1,000.0m
\(\bullet\)Net income: $150.0m
A)20%
B)15%
C)40%
D)25%
Answer: A
Q2) What is the equity value of the company given the following information?
\(\bullet\)Current share price: $40.00
\(\bullet\)Basic shares outstanding: 400.0mm
\(\bullet\)50.0mm options outstanding with an exercise price of $20.00
\(\bullet\)5.0mm warrants with an exercise price of $45.00
A)$1,600.0mm
B)$1,500.0mm
C)$1,700.0mm
D)$1,625.0mm
Answer: C
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Page 3
Chapter 2: Precedent Transactions Analysis
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Sample Questions
Q1) Calculate the fixed exchange ratio based on the following transaction details.
<u><b>Transaction Details:</b></u>
AcquirerCo agrees to purchase TargetCo in an all-stock transaction valued at $2.0 billion.TargetCo's shareholders will receive one share of AcquirerCo's stock for every four shares of TargetCo stock they own.
A)4
B).25
C)1.00
D).5
Answer: B
Q2) In a floating ratio structure, the number of shares exchanged fluctuates in accordance with which of the following?
A)Movement of the acquirer's share price
B)Movement of the target's share price
C)Market movement
D)Sector movement
Answer: A
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4
Chapter 3: Discounted Cash Flow Analysis
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Sample Questions
Q1) 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
Q2) Calculate the discount factor for $1.00 received at the end of one year, assuming a 12% discount rate.
A).80
B).95
C).87
D).89
Answer: D
Q3) When there is no debt in the capital structure, what is WAAC equal to?
A)Cost of debt
B)Debt-to-total capitalization ratio
C)Equity-to-total capitalization ratio
D)Cost of equity
Answer: D
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Chapter 4: Leveraged Buyouts
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Sample Questions
Q1) Which of the following LBO financing scenarios will lead to the highest interest expense?
A)80% equity
B)20% debt
C)60% debt
D)20% equity
Q2) Calculate the internal rate of return for a $300.0m cash outflow at the end of year 0 and a $716.0m cash inflow at the end of year 5.
A)16%
B)20%
C)18.5%
D)19%
Q3) What is the classification of a covenant requiring a borrower to maintain assets, collateral, or other securities?
A)Affirmative
B)Negative
C)Maintenance
D)Financial
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6
Chapter 5: Lbo Analysis
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Sample Questions
Q1) In a traditional LBO analysis, it is common practice to assume an exit multiple that is:
A)Below the entry multiple
B)Above the entry multiple
C)Equal to the entry multiple
D)Both A and C
Q2) Which of the following are sources of funds?
I.Term loan
II.Repayment of term loan
III.Purchase of equity
IV.Cash on hand
A)I only
B)I and IV
C)I and II
D)All are sources of funds
Q3) The ending cash balance on the cash flow statement is linked to the:
A)Retained earnings
B)Cash and cash equivalents
C)Income statement
D)Long-term assets
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Page 7
Chapter 6: Sell-Side Ma
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Sample Questions
Q1) In which of the following scenarios would a sell-side advisor consider running a broad auction?
A)Seller is flexible regarding timing
B)Seller is flexible regarding potential business disruption
C)Confidentiality is not a priority
D)All of the above
Q2) Which act requires that both parties in a large M&A transaction file notifications and report forms to the FTC and the DOJ?
A)Jones Act
B)Glass-Steagall Act
C)Sarbanes-Oxley Act
D)Hart-Scott-Rodino Act
Q3) The teaser and CIM are both part of the:
A)Financial exhibits
B)Marketing materials
C)Confidentiality agreement
D)Contract
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Chapter 7: Buy-Side Ma
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Sample Questions
Q1) Which of the following is a negative feature of debt financing?
A)Tax deductibility
B)ROE
C)Covenants
D)EPS accretion
Q2) 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
Q3) When is goodwill created?
A)purchase price exceeds the net identifiable assets
B)Acquirer's P/E is higher than target's
C)Purchase price exceeds the net identifiable assets
D)Acquirer's P/E is lower than target's
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