When we compute the EV/EBITDA multiple, i.e. the ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization, weestimate the enterprise value of a firm by adding the values of debt and equity and netting out cash. Could you provide a reason for netting outcash?O a. Cash can be used to pay down debt.O b.Cash is easy to value.O c.None of the given answers is correct.The income from cash is not part of EBITDA.Cash is liquid.O d.O e.

The EV/EBITDA multiple is a financial metric used to assess the valuation of a company. It compares…

Answered: When we compute the EV/EBITDA multiple,…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 12MC: Which of the following does nor assign a value to a business opportunity using time-value...

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Which of the following does nor assign a value to a business opportunity using time-value measurement tools? A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. payback period method
13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.
e. What is the amount of accounts payable and accruals on its balance sheet? (Hint: Consider this as a single line item on the firm's balance sheet.) $ f. What is the firm's net working capital? If your answer is zero, enter "0". $ g. What is the firm's net operating working capital? $ h. What is the monetary difference between your answers to part f and g? $ What does this difference indicate? -Select-
1 . what are the functions of working capital? 2. what factors determine the need cash in the firm's operations? 3. why are accounts receivables inevitable? what advantage do selling on account offer?
Which of the following statements is most correct? (Hint: Work Problem 4-16 before answering 4-17, and consider the solution setup for 4-16, as you think about 4-17.) a. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will raise the firm' expected return on common equity (ROE). b. The higher its tax rate, the lower a firm's BEP ratio will be, other things held constant. c. The higher the interest rate on its debt, the lower a firm's BEP ratio will be, other things held constant. d. The higher its debt ratio, the lower a firm's BEP ratio will be, other things held constant. e. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will decrease the firm's expected return on common equity (ROE).
If the generated income cash of some company were used to buy back common stock,thus reducing the amount of common equity ,how would this affect the return on equity (ROE),return on Asset(ROA) and ratio of total debt to total asset?
Which one of the following is minimized when the value of the firm is maximized? A- WACC B- Return on equity C-Debt D-Taxes E- Bankruptcy costs
D All else being equal, which one of the following will decrease a firm's current ratio? Question 17 a decrease in the net fixed assets a decrease in depreciation O a decrease in accounts payable O a decrease in a counts receivables
Comment on the following statements with suitable example: i. The ratio return on assets has net income in the numerator and total assets in the denominator. Explain how each part of the ratio could cause return on assets to fall. ii. Explain how return on assets could decline, given an increase in net profit margin. iii. If quoted market prices are not available, a personal financial statement cannot be prepared. Comment.
Which of the following would increase cash flow for a firm? a. A purchase of fixed assets b. Cash sales c. Purchase of markatable securities d. Credit sales
EBITDA makes companies with asset-heavy balance sheets look healthier than they may actually be.• EBITDA portrays a company’s debt service ability— but only some types of debt.• EBITDA isn’t a determinant of cash flow at all.
Which of the following statements is correct? a. Any forecast of financial requirements involves determining how much money the firm will need and is obtained by adding together increases in assets and spontaneous liabilities and subtracting operating income. b. The percentage of sales method of forecasting financial needs requires only a forecast of the firm's balance sheet. Although a forecasted income statement helps clarify the need, it is not essential to the percentage of sales method. c. Because dividends are paid after taxes from retained earnings, dividends are not included in the percentage of sales method of forecasting. d. Financing feedbacks describe the fact that interest must be paid on the debt used to help finance AFN and dividends must be paid on the shares issued to raise the equity part of the AFN. These payments would lower the net income and retained earnings shown in the projected financial statements. e. All of the statements above are false.

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