Question 1

Which one of the following statements concerning financial planning for a firm is correct?

Accepted Answer

A)   Financial planning for fixed assets is done on a segregated basis within each division.
B)   Financial plans often contain alternative options based on economic developments.
C)   Financial plans frequently contain conflicting goals.
D)   Financial plans assume that firms obtain no additional external financing.
E)   The financial planning process is based on a single set of economic assumptions.F) A) and B)
G) C) and D)

Question 2

When utilizing the percentage of sales approach,managers:
I.estimate company sales based on a desired level of net income and the current profit margin.
II.consider only those assets that vary directly with sales.
III.consider the current production capacity level.
IV.can project both net income and net cash flows.

Accepted Answer

A)   I and II only
B)   II and III only
C)   III and IV only
D)   I,III,and IV only
E)   II,III,and IV onlyF) B) and D)
G) A) and D)

Question 3

Which of the following can affect a firm's sustainable rate of growth?
I.capital intensity ratio
II.profit margin
III.dividend policy
IV.debt-equity ratio

Accepted Answer

A)   III only
B)   I and III only
C)   II,III,and IV only
D)   I,II,and IV only
E)   I,II,III,and IVF) None of the above
G) A) and E)

Question 4

What is the sustainable growth rate assuming the following ratios are constant?

Accepted Answer

A)   10.30 percent
B)   10.53 percent
C)   10.67 percent
D)   10.89 percent
E)   11.01 percentF) A) and E)
G) B) and C)

Question 5

The Cookie Shoppe expects sales of $437,500 next year.The profit margin is 5.3 percent and the firm has a 30 percent dividend payout ratio.What is the projected increase in retained earnings?

Accepted Answer

A)   $16,231
B)   $17,500
C)   $18,300
D)   $20,600
E)   $21,000F) A) and B)
G) B) and C)

Question 6

Financial planning:

Accepted Answer

A)   focuses solely on the short-term outlook for a firm.
B)   is a process that firms employ only when major changes to a firm's operations are anticipated.
C)   is a process that firms undergo once every five years.
D)   considers multiple options and scenarios for the next two to five years.
E)   provides minimal benefits for firms that are highly responsive to economic changes.F) C) and D)
G) A) and E)

Question 7

Which one of the following statements is correct?

Accepted Answer

A)   Pro forma statements must assume that no new equity is issued.
B)   Pro forma statements are projections,not guarantees.
C)   Pro forma statements are limited to a balance sheet and income statement.
D)   Pro forma financial statements must assume that no dividends will be paid.
E)   Net working capital needs are excluded from pro forma computations.F) C) and E)
G) A) and B)

Question 8

-The most recent financial statements for 7 Seas,Inc.are shown here: 
Assets,costs,and current liabilities are proportional to sales.Long-term debt and equity are not.The company maintains a constant 50 percent dividend payout ratio.Like every other firm in its industry,next year's sales are projected to increase by exactly 16 percent.What is the external financing need?

Accepted Answer

A)   $1,317.16
B)   $1,411.16
C)   $1,583.09
D)   $2,211.87
E)   $2,349.98F) A) and C)
G) A) and B)

Question 9

Which one of the following will cause the sustainable growth rate to equal to internal growth rate?

Accepted Answer

A)   dividend payout ratio greater than 1.0
B)   debt-equity ratio of 1.0
C)   retention ratio between 0.0 and 1.0
D)   equity multiplier of 1.0
E)   zero dividend paymentsF) A) and B)
G) C) and D)

Question 10

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels.Given this,you can safely assume that the firm:

Accepted Answer

A)   is projected to grow at the internal rate of growth.
B)   is projected to grow at the sustainable rate of growth.
C)   currently has excess capacity.
D)   is currently operating at full capacity.
E)   retains all of its net income.F) B) and C)
G) All of the above

Question 11

A firm has a retention ratio of 45 percent and a sustainable growth rate of 6.2 percent.The capital intensity ratio is 1.2 and the debt-equity ratio is 0.64.What is the profit margin?

Accepted Answer

A)   6.28 percent
B)   7.67 percent
C)   9.49 percent
D)   12.38 percent
E)   14.63 percentF) A) and B)
G) A) and C)

Question 12

Seaweed Mfg. ,Inc.is currently operating at only 84 percent of fixed asset capacity.Current sales are $550,000.What is the maximum rate at which sales can grow before any new fixed assets are needed?

Accepted Answer

A)   17.23 percent
B)   17.47 percent
C)   18.03 percent
D)   18.87 percent
E)   19.05 percentF) All of the above
G) C) and D)

Question 13

The sustainable growth rate of a firm is best described as the:

Accepted Answer

A)   minimum growth rate achievable assuming a 100 percent retention ratio.
B)   minimum growth rate achievable if the firm maintains a constant equity multiplier.
C)   maximum growth rate achievable excluding external financing of any kind.
D)   maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
E)   maximum growth rate achievable with unlimited debt financing.F) A) and C)
G) A) and B)

Question 14

Stop and Go has a 4.5 percent profit margin and an 18 percent dividend payout ratio.The total asset turnover is 1.6 and the debt-equity ratio is 0.45.What is the sustainable rate of growth?

Accepted Answer

A)   8.13 percent
B)   8.54 percent
C)   8.89 percent
D)   9.26 percent
E)   9.36 percentF) B) and D)
G) B) and E)

Question 15

You are developing a financial plan for a corporation.Which of the following questions will be considered as you develop this plan?
I.How much net working capital will be needed?
II.Will additional fixed assets be required?
III.Will dividends be paid to shareholders?
IV.How much new debt must be obtained?

Accepted Answer

A)   I and IV only
B)   II and III only
C)   I,III,and IV only
D)   II,III,and IV only
E)   I,II,III,and IVF) B) and E)
G) A) and B)

Question 16

Which of the following questions are appropriate to address during the financial planning process?
I.Should the firm merge with a competitor?
II.Should additional shares of stock be sold?
III.Should a particular division be sold?
IV.Should a new product be introduced?

Accepted Answer

A)   I,II,and III only
B)   I,II,and IV only
C)   I,III,and IV only
D)   II,III,and IV only
E)   I,II,III,and IVF) A) and B)
G) A) and C)

Question 17

Seaweed Mfg. ,Inc.is currently operating at only 86 percent of fixed asset capacity.Fixed assets are $387,000.Current sales are $510,000 and are projected to grow to $664,000.What amount must be spent on new fixed assets to support this growth in sales?

Accepted Answer

A)   $0
B)   $22,654
C)   $46,319
D)   $79,408
E)   $93,608F) A) and B)
G) B) and E)

Question 18

A)What are the assumptions that underlie the internal growth rate and B)what are the implications of this rate?

Accepted Answer

The basic assumptions are:Costs and net ...

Question 19

The Dog House has net income of $3,450 and total equity of $8,600.The debt-equity ratio is 0.60 and the payout ratio is 30 percent.What is the internal growth rate?

Accepted Answer

A)   14.47 percent
B)   17.78 percent
C)   21.29 percent
D)   29.40 percent
E)   33.33 percentF) B) and C)
G) B) and D)

Question 20

A firm wishes to maintain a growth rate of 8 percent and a dividend payout ratio of 62 percent.The ratio of total assets to sales is constant at 1,and the profit margin is 10 percent.What must the debt-equity ratio be if the firm wishes to keep that ratio constant?

Accepted Answer

A)   0.05
B)   0.40
C)   0.55
D)   0.60
E)   0.95F) All of the above
G) A) and B)

Exam 4: Long-Term Financial Planning and Growthpart Three: Valuation of Future Cash Flows

The sustainable growth rate of a firm is best described as the:

Correct Answer
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Which one of the following statements is correct?

Correct Answer
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Stop and Go has a 4.5 percent profit margin and an 18 percent dividend payout ratio.The total asset turnover is 1.6 and the debt-equity ratio is 0.45.What is the sustainable rate of growth?

Correct Answer
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A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels.Given this,you can safely assume that the firm:

Correct Answer
verified

A firm wishes to maintain a growth rate of 8 percent and a dividend payout ratio of 62 percent.The ratio of total assets to sales is constant at 1,and the profit margin is 10 percent.What must the debt-equity ratio be if the firm wishes to keep that ratio constant?

Correct Answer
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Correct Answer
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Seaweed Mfg. ,Inc.is currently operating at only 84 percent of fixed asset capacity.Current sales are $550,000.What is the maximum rate at which sales can grow before any new fixed assets are needed?

Correct Answer
verified

What is the sustainable growth rate assuming the following ratios are constant?

Correct Answer
verified

Correct Answer
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Which one of the following statements concerning financial planning for a firm is correct?

Correct Answer
verified

Financial planning:

Correct Answer
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A)What are the assumptions that underlie the internal growth rate and B)what are the implications of this rate?

Correct Answer
verified
The basic assumptions are:Costs and net ...
View Answer

The Dog House has net income of $3,450 and total equity of $8,600.The debt-equity ratio is 0.60 and the payout ratio is 30 percent.What is the internal growth rate?

Correct Answer
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Which one of the following will cause the sustainable growth rate to equal to internal growth rate?

Correct Answer
verified

The Cookie Shoppe expects sales of $437,500 next year.The profit margin is 5.3 percent and the firm has a 30 percent dividend payout ratio.What is the projected increase in retained earnings?

Correct Answer
verified

A firm has a retention ratio of 45 percent and a sustainable growth rate of 6.2 percent.The capital intensity ratio is 1.2 and the debt-equity ratio is 0.64.What is the profit margin?

Correct Answer
verified

Which of the following can affect a firm's sustainable rate of growth? I.capital intensity ratio II.profit margin III.dividend policy IV.debt-equity ratio

Correct Answer
verified

Which of the following questions are appropriate to address during the financial planning process? I.Should the firm merge with a competitor? II.Should additional shares of stock be sold? III.Should a particular division be sold? IV.Should a new product be introduced?

Correct Answer
verified

Seaweed Mfg. ,Inc.is currently operating at only 86 percent of fixed asset capacity.Fixed assets are $387,000.Current sales are $510,000 and are projected to grow to $664,000.What amount must be spent on new fixed assets to support this growth in sales?

Correct Answer
verified

Correct Answer
verified

Exam 4: Long-Term Financial Planning and Growthpart Three: Valuation of Future Cash Flows

The sustainable growth rate of a firm is best described as the:

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Stop and Go has a 4.5 percent profit margin and an 18 percent dividend payout ratio.The total asset turnover is 1.6 and the debt-equity ratio is 0.45.What is the sustainable rate of growth?

Correct AnswerverifiedShow Answer

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels.Given this,you can safely assume that the firm:

Correct AnswerverifiedShow Answer

A firm wishes to maintain a growth rate of 8 percent and a dividend payout ratio of 62 percent.The ratio of total assets to sales is constant at 1,and the profit margin is 10 percent.What must the debt-equity ratio be if the firm wishes to keep that ratio constant?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Seaweed Mfg. ,Inc.is currently operating at only 84 percent of fixed asset capacity.Current sales are $550,000.What is the maximum rate at which sales can grow before any new fixed assets are needed?

Correct AnswerverifiedShow Answer

What is the sustainable growth rate assuming the following ratios are constant?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements concerning financial planning for a firm is correct?

Correct AnswerverifiedShow Answer

Financial planning:

Correct AnswerverifiedShow Answer

A)What are the assumptions that underlie the internal growth rate and B)what are the implications of this rate?

Correct AnswerverifiedThe basic assumptions are:Costs and net ...View AnswerShow Answer

The Dog House has net income of $3,450 and total equity of $8,600.The debt-equity ratio is 0.60 and the payout ratio is 30 percent.What is the internal growth rate?

Correct AnswerverifiedShow Answer

Which one of the following will cause the sustainable growth rate to equal to internal growth rate?

Correct AnswerverifiedShow Answer

The Cookie Shoppe expects sales of $437,500 next year.The profit margin is 5.3 percent and the firm has a 30 percent dividend payout ratio.What is the projected increase in retained earnings?

Correct AnswerverifiedShow Answer

A firm has a retention ratio of 45 percent and a sustainable growth rate of 6.2 percent.The capital intensity ratio is 1.2 and the debt-equity ratio is 0.64.What is the profit margin?

Correct AnswerverifiedShow Answer

Which of the following can affect a firm's sustainable rate of growth? I.capital intensity ratio II.profit margin III.dividend policy IV.debt-equity ratio

Correct AnswerverifiedShow Answer

Which of the following questions are appropriate to address during the financial planning process? I.Should the firm merge with a competitor? II.Should additional shares of stock be sold? III.Should a particular division be sold? IV.Should a new product be introduced?

Correct AnswerverifiedShow Answer

Seaweed Mfg. ,Inc.is currently operating at only 86 percent of fixed asset capacity.Fixed assets are $387,000.Current sales are $510,000 and are projected to grow to $664,000.What amount must be spent on new fixed assets to support this growth in sales?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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The basic assumptions are:Costs and net ...
View Answer

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Correct Answer
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Correct Answer
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