If a Venture Has Too Much Money Too Early, Problems

question 20

Multiple Choice

If a venture has too much money too early, problems may occur which can include all except ________.

• A) the firm's flexibility can be reduced by depending on significant cash flow from loans
• B) potential problems can be obscured until their consequences become irreversible
• C) the firm can end up hiring less qualified personnel
• D) the firm can be sheltered from the need to innovate

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Definitions:

Plowback Ratio

The Plowback Ratio, also known as the retention ratio, measures the proportion of earnings that are retained by the company rather than paid out as dividends.

P/E Ratio

Price-to-Earnings Ratio, a valuation metric comparing the current share price of a company to its per-share earnings.

ROE

Return on Equity, a financial ratio that measures the profitability of a corporation in relation to stockholders' equity.

EPS

Earnings Per Share, a financial metric that divides a company's profit by the number of its shares outstanding.