Karabo Wants to Start a Graphic Design Company That Will

question 72

Multiple Choice

Karabo wants to start a graphic design company that will have employees who are highly skilled at using complex computer programs. For this type of company, Karabo would most likely want to

• A)give upper-level managers the responsibility for most client-related decisions but handle corporate decisions himself.
• B)make sure that all design decisions are run by him before they are implemented by employees.
• C)give lower-level managers and the graphic designers the authority to make important decisions.
• D)give graphic designers the ability to make decisions, but insist that they get approval from upper management.

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Definitions:

P/E

Price-to-Earnings ratio, a valuation metric that compares a company's market share price to its per-share earnings, used to assess if a stock is over or under-valued.

Free Cash Flow

Cash generated by a company's operations minus capital expenditures, indicating the amount of cash a company can distribute to shareholders or reinvest.

Net Debt

The total debt of a company minus its cash and cash equivalents, indicating the actual debt burden on the company.

Cost of Equity

The return that a company requires to decide if an investment meets capital return requirements and is often used in financial modeling for valuing a company.