Module 3 — 100 Multiple‑Choice Questions
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1
Zero‑based budgeting means…
Zero‑based starts from a blank slate to eliminate legacy waste.
2
A rolling forecast is…
Rolling forecasts refresh assumptions monthly/quarterly.
3
Best use of scenario planning is to…
Scenario modeling readies the business for uncertainty.
4
Driver‑based forecasting focuses on…
Tie financials to measurable business drivers.
5
Which tactic helps control OpEx during scale?
Use triggers and guardrails to pace spend with traction.
6
Cash budgeting is crucial because…
Cash timing (CCC) can sink profitable businesses.
7
Forecast accuracy improves by…
Iterate and measure forecast error to calibrate.
8
Capex vs Opex distinction matters because…
Treatment affects profit metrics and cash planning.
9
A budget owner should have…
Ownership + thresholds keep spending aligned to outcomes.
10
Forecast bias is reduced by…
Structured checks temper optimism/pessimism.
11
ROI is defined as…
ROI evaluates return relative to invested capital.
12
A strong LTV:CAC ratio typically is…
>3Ă— suggests scalable acquisition economics.
13
The current ratio measures…
Current assets / current liabilities.
14
Gross margin indicates…
Revenue minus COGS as % of revenue.
15
High leverage (debt‑to‑equity) mainly increases…
More debt amplifies returns and losses.
16
Inventory turnover shows…
COGS Ă· average inventory (or sales Ă· avg inventory).
17
ROE measures…
Net income / shareholders’ equity.
18
Quick ratio differs from current ratio by…
Focuses on most liquid current assets.
19
Contribution margin helps decide…
Revenue – variable costs at unit level.
20
Which pair tracks efficiency best?
Revenue per user and time to recover CAC.
21
DCF valuation estimates value from…
DCF = PV of expected cash flows.
22
A valuation multiple like EV/EBITDA comes from…
Use peer multiples to infer value.
23
Asset‑based valuation works best for…
Balance sheet assets dominate value.
24
Terminal value in DCF captures…
Often majority of DCF via perpetuity or exit multiple.
25
A key DCF input most sensitive is often…
WACC and long‑run growth drive PV strongly.
26
Pre‑money valuation means…
Post‑money = pre‑money + new money.
27
Why triangulate valuation methods?
Use DCF, comps, and transactions for balance.
28
Revenue multiples are common when…
Early‑stage/high‑growth firms often priced on revenue.
29
A cap table tracks…
Essential for equity negotiations and dilution math.
30
Which reduces valuation risk?
Transparency and evidence build buyer/investor confidence.
31
Angels typically invest…
Angels provide seed capital and guidance.
32
VCs target…
VCs seek 10Ă— potential to offset failures.
33
Crowdfunding excels when…
Community validation + pre‑orders de‑risk launch.
34
A SAFE instrument is…
Converts to equity in a future priced round.
35
Convertible notes differ by…
Debt converts later; can accrue interest and have caps/discounts.
36
A pitch should highlight…
Investors buy growth engines with proof, not slides alone.
37
Data room essentials include…
Organized evidence speeds diligence.
38
Sign of a strong round is…
Multiple offers increase leverage and valuation.
39
Equity crowdfunding risk is…
Many small investors require clean processes.
40
Non‑dilutive capital includes…
Cash without giving up ownership (though with terms).
41
Equity financing trades…
You sell shares to raise money.
42
Debt financing requires…
Debt preserves ownership but adds obligations.
43
Advantage of equity is…
Cash runway without fixed payments, but dilution applies.
44
Advantage of debt is…
Debt keeps ownership but must be serviceable.
45
A covenant is…
Breaching covenants triggers penalties or default.
46
Blended structures include…
Hybrids balance dilution and cash needs.
47
When is debt dangerous?
Unstable cash flow raises default risk.
48
Payback period on CAC is…
Shorter payback improves cash liquidity.
49
WACC stands for…
Blends cost of equity and debt.
50
Optimal mix depends on…
Match financing to strategy and resilience.
51
Diversification reduces…
You cannot diversify away market risk.
52
A 60/40 portfolio refers to…
A traditional balanced allocation.
53
REITs are…
Vehicles that own income‑producing real estate.
54
Venture investments are characterized by…
Few winners drive most returns.
55
Geographic diversification helps by…
Spread exposure across economies/currencies.
56
Dollar‑cost averaging is…
Smooths entry price volatility.
57
Correlation matters because…
Combine low‑correlated assets to diversify.
58
ETFs are…
Provide diversified exposure at low cost.
59
Rebalancing does what?
Sell overweight, buy underweight to maintain allocation.
60
Alternative assets can include…
Diversify beyond public equities/bonds.
61
Sharpe ratio compares…
Higher Sharpe = better risk‑adjusted return.
62
Sortino ratio differs by…
Penalizes harmful volatility more.
63
Beta measures…
Beta > 1 moves more than market; < 1 less.
64
VaR estimates…
Quantifies tail‑risk boundaries.
65
Hedging aims to…
Trade return for reduced volatility/tail risk.
66
Capital allocation should…
Portfolio math needs all three.
67
Kelly fraction maximizes…
Kelly sizes positions based on edge and odds.
68
Risk parity allocates…
Balance contributions to total risk, not dollars.
69
Downside protection tools include…
Cap losses at cost of premiums/opportunity.
70
Stress‑testing a plan means…
Pressure‑test before committing capital.
71
Tax planning should be…
Structure first; transactions later.
72
Entity choice affects…
Choose LLC/S‑Corp/C‑Corp based on goals.
73
Deferral strategies include…
Timing can shift tax burdens legally.
74
Depreciation allows…
Non‑cash expense reduces taxable income.
75
R&D credits…
Many jurisdictions credit research outlays.
76
Transfer pricing issues arise in…
Intercompany pricing must be arm’s‑length.
77
NOL (Net Operating Loss) can…
Loss utilization smooths tax over time.
78
Sales tax/VAT compliance requires…
Automate calculation and filing where possible.
79
Tax risk rises when…
Maintain evidence and get advice for complex matters.
80
Ethical tax optimization is…
Comply while minimizing burden via lawful methods.
81
An IPO is…
Public listing increases capital access and liquidity.
82
M&A stands for…
Companies combine or one buys another.
83
A key exit readiness factor is…
Diligence relies on accurate, organized records.
84
Earn‑outs are…
Bridge valuation gaps via performance‑linked payouts.
85
Why run a structured auction?
Multiple bidders improve price and conditions.
86
Retention packages target…
Continuity preserves value after closing.
87
Working capital adjustment…
Ensures normal operations funding transfers with the business.
88
Reps & warranties protect…
Breaches can trigger indemnities/escrows.
89
Data room best practices include…
Professional data rooms speed diligence and build trust.
90
Post‑merger integration risk is…
PMI determines whether deal value is realized.
91
Reinvestment drives…
Plowbacks fuel future cash flows.
92
Best reinvestment areas include…
Focus on levers that scale advantage.
93
A payout policy sets…
Balance returns to owners with growth needs.
94
Reinvestment decision should use…
Quant + strategy filters maximize ROI.
95
Why not reinvest 100% forever?
Balance diversification and stakeholder expectations.
96
Capital allocation mistakes include…
Beware shiny objects and poor ROI oversight.
97
A hurdle rate represents…
Projects must exceed cost of capital + risk premium.
98
Owner’s earnings approximate…
Buffett’s proxy for distributable cash.
99
Retention vs. dividend choice hinges on…
Retain if you can compound at high rates; else return cash.
100
Flywheel logic in reinvestment is…
Positive feedback loops create momentum.