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Quizzes > Quizzes for Business > Finance

Take the Sales Finance Knowledge Assessment

Test Your Sales Finance Skills and Insights

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting a quiz on Sales Finance Knowledge Assessment

Ready to test your expertise in a dynamic sales finance quiz? Designed by Joanna Weib, this interactive finance assessment evaluates your grasp of forecasting, revenue recognition, and risk management. Ideal for sales managers, finance professionals, and students seeking targeted practice in sales finance skills. Feeling confident? Try the Finance Knowledge Assessment Quiz or explore other Sales Training Knowledge Assessment options in our quizzes library. Each question can be freely customized in the editor to suit your learning goals.

Under accrual accounting principles, revenue is generally recognized when:
Control of goods or services transfers to the customer.
Cash payment is received.
At the end of the fiscal quarter.
An invoice is sent to the customer.
Accrual accounting recognizes revenue when control of the promised goods or services transfers to the customer, aligning with core revenue recognition principles. This ensures revenue is matched with performance rather than cash flow.
Which of the following is a common financing strategy where a business sells its receivables to a third party at a discount?
Trade receivables factoring.
Venture capital investment.
Equity financing.
Corporate bond issuance.
Factoring involves selling receivables at a discount to improve liquidity and transfer collection risk. It is widely used to accelerate cash flow without incurring new debt.
Which key performance metric measures the average number of days it takes a company to collect payment after a sale?
Days Sales Outstanding (DSO).
Gross Profit Margin.
Current Ratio.
Inventory Turnover.
Days Sales Outstanding (DSO) calculates the average collection period for receivables, indicating how efficiently a company manages credit and collections. Lower DSO reflects faster collection.
In credit risk assessment, which of the following is most directly used to assess a customer's likelihood to repay?
Advertising spend.
Employee headcount.
Market share.
Credit score.
A credit score quantifies a borrower's creditworthiness based on payment history and other financial behaviors. It is a primary input for assessing default risk.
Which simple forecasting method calculates the forecast as the average of a fixed number of past observations?
Scenario planning.
Regression analysis.
Moving average.
Exponential smoothing.
The moving average method takes the arithmetic mean of a set number of past data points to project future values, smoothing out short-term fluctuations. It is straightforward to implement and interpret.
Under IFRS 15 revenue recognition, after identifying performance obligations and determining the transaction price, the next step is to:
Invoice the customer.
Recognize revenue in the income statement.
Allocate the transaction price to the performance obligations.
Determine the contract inception date.
Step 4 of the IFRS 15 five-step model is to allocate the transaction price to performance obligations based on standalone selling prices. This ensures revenue reflects each obligation's relative value.
The Accounts Receivable Turnover ratio is calculated as net credit sales divided by:
Total assets.
Average accounts receivable.
Average inventory.
Net income.
AR turnover measures how efficiently a company collects receivables by dividing net credit sales by the average balance of accounts receivable over the period. Higher ratios indicate quicker collections.
Which financial model uses multiple weighted financial ratios to predict the probability of corporate bankruptcy?
Black-Scholes model.
Credit Default Swap pricing model.
Value at Risk (VaR) model.
Altman Z-score model.
The Altman Z-score combines financial ratios, such as working capital and retained earnings, to predict a firm's likelihood of bankruptcy. It is widely used in credit risk assessment.
Which forecasting technique explicitly models both trend and seasonality in sales data?
Naive forecasting.
Simple moving average.
Holt-Winters exponential smoothing.
Linear regression without seasonal dummies.
Holt-Winters exponential smoothing incorporates level, trend, and seasonal components to forecast time series data. It adapts to changes in underlying patterns over time.
A revolving credit facility allows a borrower to:
Engage in receivables factoring without recourse.
Draw, repay, and redraw funds up to a limit repeatedly.
Convert receivables into equity.
Obtain a one-time lump sum loan.
A revolving credit facility provides flexibility to borrow, repay, and borrow again up to a set limit, making it suitable for managing short-term working capital needs.
If a company extends its accounts payable terms from 30 days to 60 days, what is the likely impact on its cash conversion cycle (CCC), all else equal?
CCC remains unchanged.
CCC increases, indicating more cash tied up.
CCC becomes negative.
CCC decreases, improving short-term liquidity.
Extending payment terms increases days payable outstanding (DPO), which lowers the cash conversion cycle (CCC = DSO + DIO - DPO), thereby improving liquidity by delaying cash outflows.
Which financing strategy increases a company's leverage without diluting existing ownership?
Issuing new equity shares.
Converting debt to equity.
Granting stock options to employees.
Taking on additional debt.
Debt financing increases leverage because it raises debt-to-equity without issuing new shares, thus preserving existing ownership stakes while funding operations or investments.
The Cash Conversion Cycle is calculated as:
DSO + DIO + DPO.
DPO - (DSO + DIO).
DSO + DIO - DPO.
(DSO + DIO) / DPO.
The cash conversion cycle equals days sales outstanding plus days inventory outstanding minus days payable outstanding, measuring net days funds are tied up in operations.
Return on Sales (ROS) is a profitability metric defined as:
Net income divided by total assets.
Net income divided by net sales.
Gross profit divided by net sales.
Operating income divided by equity.
Return on Sales (ROS) measures net income generated per dollar of sales by dividing net income by net sales. It reflects overall pricing and cost efficiency.
In secured lending, the Loan-to-Value (LTV) ratio is calculated by dividing the loan amount by:
Borrower's equity.
Borrower's annual income.
Total debt.
Value of collateral.
LTV compares the size of the loan to the value of the pledged collateral, indicating the lender's risk exposure relative to the collateral's market value.
Under IFRS 15, to estimate variable consideration subject to constraint, companies commonly use:
Historical averaged budgets.
Valuation at fair market value.
The most likely single amount only.
The expected value method, summing probability-weighted amounts.
IFRS 15 allows using the expected value method - summing probability-weighted outcomes - to estimate variable consideration, provided the estimate is not likely to reverse significantly.
When a company securitizes its trade receivables, it primarily transfers which risk to the investors?
Market risk.
Operational risk of collection.
Liquidity risk of cash holdings.
Credit risk of the receivables.
Securitization packages receivables into financial instruments and sells them to investors, thereby transferring the underlying credit risk of those receivables.
The expected loss (EL) on a loan is commonly calculated as the product of:
Loss given default (LGD) and exposure at default (EAD) squared.
Probability of default (PD) and exposure at default (EAD).
PD plus LGD plus EAD.
PD, LGD, and EAD multiplied together.
Expected loss equals PD × LGD × EAD, capturing the likelihood of default, the severity of loss if default occurs, and the size of the exposure.
In ARIMA forecasting, which component represents the degree of differencing applied to make the series stationary?
MA term.
AR term.
I term.
Seasonal term.
The 'I' in ARIMA stands for integration, reflecting the number of times the data are differenced to achieve stationarity before applying autoregressive and moving average components.
A debt covenant requires a minimum Debt Service Coverage Ratio (DSCR). DSCR is defined as:
EBITDA divided by current liabilities.
(Net income + depreciation) divided by interest expense.
Operating cash flow divided by total debt.
Cash available for servicing debt divided by debt service payments.
DSCR measures a borrower's ability to meet debt obligations by dividing cash available for debt service by scheduled debt payments (principal plus interest).
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Learning Outcomes

  1. Analyze revenue recognition principles in sales finance
  2. Evaluate financing strategies for client transactions
  3. Identify key performance metrics in sales finance
  4. Demonstrate understanding of credit risk assessment
  5. Apply forecasting techniques to sales finance scenarios

Cheat Sheet

  1. Master the Five-Step Revenue Recognition Model - Use this five-step roadmap: spot the contract, list promises, set the price, allocate revenue, and confirm it only when goods or services are delivered. This method makes your financials bulletproof. Learn more on Investopedia
  2. Grasp the Criteria for Revenue Recognition - Under IFRS, revenue recognition hinges on transferring control, risks, and rewards, plus assurance of payment. Nail these criteria to book revenue at exactly the right moment. Explore the criteria at Corporate Finance Institute
  3. Explore Different Revenue Recognition Methods - From percentage-of-completion to completed-contract, different methods fit different industries - think construction or software. Picking the right approach helps you show revenue in step with project progress. Check out Accounting Insights' overview
  4. Understand Variable Consideration - Discounts, rebates, or bonuses can twist your transaction price like plot twists in a movie. Learn to estimate and cap variable consideration to keep your revenue statements spoiler-free. Learn more on Accounting Insights
  5. Recognize the Impact of Financing Components - If a contract has a big time gap or financing twist, adjust for the time value of money. Recognizing these components prevents revenue from being shown too early or delayed. Read about IFRS 15 on Wikipedia
  6. Apply the Matching Principle - Match expenses with the revenues they fuel like peanut butter and jelly - partners in crime. This principle paints a clearer picture of profit in each reporting period. Review related principles on Investopedia
  7. Analyze Performance Obligations - Dissect contracts to find distinct goods or services - each is a separate promise to the customer. Allocating revenue properly ensures you don't give away too much credit. Discover performance obligations under IFRS 15
  8. Evaluate Timing of Revenue Recognition - Decide if revenue is booked at a point in time or over time based on when control transfers - like claiming achievement badges right when you earn them. Proper timing keeps your books on beat. Find timing guidelines at CFI
  9. Understand the Role of Collectability - Never record revenue until you're reasonably sure you'll get paid - think of it like waiting for a text back before celebrating. This rule protects your statements from uncollectible surprises. Assess collectability on Investopedia
  10. Stay Updated on Revenue Recognition Standards - Stay on top of IFRS 15 and ASC 606 updates like following your favorite YouTuber's new uploads. Regularly checking changes helps you remain compliant and avoid reporting hiccups. Keep up with Accounting Insights
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