Question 1

What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S0)?

Accepted Answer

A)  Capital intensity ratio 
B)  Current ratio 
C)  Quick ratio 
D)  Spontaneous assets 
A)  Capital intensity ratio 
B)  Current ratio 
C)  Quick ratio 
D)  Spontaneous assets

Question 2

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?
$$\begin{array} { c c c c c c c } 
\text { YEar } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 2,500,000 & \$ 3,750,000 & \$ 2,400,000 & \$ 2,000,000 & 2,900,000
\end{array}$$

Accepted Answer

A)  $2,450,000 
B)  $2,900,000 
C)  $2,350,000 
D)  $2,585,000 
A)  $2,450,000 
B)  $2,900,000 
C)  $2,350,000 
D)  $2,585,000

Question 3

________ is relevant assets divided by current sales.

Accepted Answer

A)  additional funds needed 
B)  capital intensity ratio 
C)  trade credit 
D)  spontaneous liabilities ratio 
A)  additional funds needed 
B)  capital intensity ratio 
C)  trade credit 
D)  spontaneous liabilities ratio

Question 4

Goldilochs Inc. reported sales of $8 million and net income of $2 million. The firm has a total asset turnover of 3.2. The firm's chief financial officer is projecting a $5 million increase in sales and that spontaneous liabilities will increase by $350,000 automatically. The firm currently pays out 80 percent of its net income to shareholders. Assuming that all assets and current liabilities are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

Accepted Answer

A)  $501,900 
B)  $562,500 
C)  $601,800 
D)  $446,600 
A)  $501,900 
B)  $562,500 
C)  $601,800 
D)  $446,600

Question 5

Which of the following statements is incorrect?

Accepted Answer

A)  For most businesses, increases in spontaneous liabilities will be enough to fund the necessary increases in assets. 
B)  The capital intensity ratio indicates the amount of assets the firm needs to invest to generate each dollar in sales. 
C)  The vast majority of fixed assets are "chunky" or "lumpy" since they have to be bought in non-divisible quantities. 
D)  All of these choices are correct. 
A)  For most businesses, increases in spontaneous liabilities will be enough to fund the necessary increases in assets. 
B)  The capital intensity ratio indicates the amount of assets the firm needs to invest to generate each dollar in sales. 
C)  The vast majority of fixed assets are "chunky" or "lumpy" since they have to be bought in non-divisible quantities. 
D)  All of these choices are correct.

Question 6

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach?
$$\begin{array} { l l l c l l l } 
\text { Year } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 50,000 & \$  100,000 & \$ 110,000 & \$ 150,000 & \$ 165,000
\end{array}$$

Accepted Answer

A)  $115,000 
B)  $140,000 
C)  $165,000 
D)  $180,000 
A)  $115,000 
B)  $140,000 
C)  $165,000 
D)  $180,000

Question 7

Suppose that Psy Ops Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $6 million. The firm also has a profit margin of 9 percent, a retention ratio of 5 percent, and expects sales of $8.5 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, how much additional funds will Psy Ops need from external sources to fund the expected growth?
$$\begin{array} { l r l r r } 
 \text { Assets } && { \text { Iiabilities ard Equity } } \
\text { Current Assets } & \$ 2,500,000 & \text { Current Liabilities } & \$ 500,000 \
\text { Fixed Assets } &  3,500,000 & \text { Long-tern Debt } & 2,000,000 \
& & \text { Equity } & 3,500,000 \
\text { Total Assets } & \$ 6,000,000 & \text { Total Liabilities and Equity } & \$ 6,000,000
\end{array}$$

Accepted Answer

A)  $795,100 
B)  $141,300 
C)  $783,600 
D)  $214,900 
A)  $795,100 
B)  $141,300 
C)  $783,600 
D)  $214,900

Question 8

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend?
$$\begin{array} { c c c c c c } 
\text { Year } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 2,500,000 & \$ 2,800,000 & \$ 2,200,000 & \$ 2,400,000 & \$ 2,600,000
\end{array}$$

Accepted Answer

A)  $2,340,000 
B)  $2,500,000 
C)  $2,575,000 
D)  $2,600,000 
A)  $2,340,000 
B)  $2,500,000 
C)  $2,575,000 
D)  $2,600,000

Question 9

Suppose that Wave Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $25 million. The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $27 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?
$$\begin{array} { l r r l r } 
 \text { Assets } && { \text { Liabilities ard Equity } } \
\text { Current Assets } & \$  6,500,000 & \text { Current Liabilities } & \$ 4,000,000 \
\text { Fixed Assets } &  13,000,000 & \text { Long-tem Debt } & { 6,500,000 } \
& &  \text { Equity } & 9,000,000 \
\text { Total Assets } & \$ 19,500,000 & \text { Total Liabilities and Equity } & \$ 19,500,000
\end{array}$$

Accepted Answer

A)  $0 
B)  $300,000 
C)  $340,000 
D)  $20,000 
A)  $0 
B)  $300,000 
C)  $340,000 
D)  $20,000

Question 10

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it was determined that 2013 is a "stale" year?
$$\begin{array} { c c c c c c c } 
\text { Year } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 1,000,000 & \$ 2,000,000 & \$ 1,700,000 & \$ 1,800,000 & \$  2,200,000
\end{array}$$

Accepted Answer

A)  $1,000,000 
B)  $1,740,000 
C)  $1,925,000 
D)  $2,200,000 
A)  $1,000,000 
B)  $1,740,000 
C)  $1,925,000 
D)  $2,200,000

Question 11

Which of the following statements are a reason for base case projections?

Accepted Answer

A)  Useful in the strategic planning process for setting internal goals. 
B)  For providing information to shareholders and other stakeholders concerning firm's future expectations. 
C)  For estimating the firm's future needs for internal and external financing 
D)  all of the above 
A)  Useful in the strategic planning process for setting internal goals. 
B)  For providing information to shareholders and other stakeholders concerning firm's future expectations. 
C)  For estimating the firm's future needs for internal and external financing 
D)  all of the above

Question 12

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that none of the years are "stale"?
$$\begin{array} { c c c c c c c } 
\text { Year } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 1,600,000 & \$ 1,500,000 & \$ 1,700,000 & \$ 1,700,000 & 1,800,000
\end{array}$$

Accepted Answer

A)  $1,600,000 
B)  $1,660,000 
C)  $1,700,000 
D)  $1,800,000 
A)  $1,600,000 
B)  $1,660,000 
C)  $1,700,000 
D)  $1,800,000

Question 13

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?
$$\begin{array} { c c c c c c } 
\text { Year } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 500,000 & \$ 600,000 & \$ 700,000 & \$ 400,000 & \$ 700,000
\end{array}$$

Accepted Answer

A)  $500,000 
B)  $580,000 
C)  $625,000 
D)  $700,000 
A)  $500,000 
B)  $580,000 
C)  $625,000 
D)  $700,000

Question 14

Which of the following statements is correct?

Accepted Answer

A)  The sales forecast is the driver for corporate financial planning. 
B)  The addition to retained earnings is the driver for corporate financial planning. 
C)  The debt ratio is the driver for corporate financial planning. 
D)  None of the statements are correct. 
A)  The sales forecast is the driver for corporate financial planning. 
B)  The addition to retained earnings is the driver for corporate financial planning. 
C)  The debt ratio is the driver for corporate financial planning. 
D)  None of the statements are correct.

Question 15

Suppose that BBM Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $2 million. The firm also has a profit margin of 5 percent, a retention ratio of 50 percent, and expects sales of $2.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?
$$\begin{array} { l r l l l } 
 \text { Assets } & & { \text { Liabilities and Equity } } \
\text { Current Assets } & \$ 1,000,000 & \text { Current Liabilities } & \$ 1,000,000 \
\text { Fixed Assets } &  2,000,000 & \text { Long-tern Debt } & 1,000,000 \
& & \text { Equity } & 1,000,000 \
\text { Total Assets } & \$ 3,000,000 & \text { Total Liabilities ard Equity } & \$ 3,000,000
\end{array}$$

Accepted Answer

A)  $0 
B)  $62,500 
C)  $437,500 
D)  $500,000 
A)  $0 
B)  $62,500 
C)  $437,500 
D)  $500,000

Question 16

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?
$$\begin{array} { l l l c l l l } 
\text { Year } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 500,000 & \$  750,000 & \$ 700,000 & \$ 750,000 & \$ 775,000
\end{array}$$

Accepted Answer

A)  $695,000 
B)  $700,000 
C)  $750,000 
D)  $775,000 
A)  $695,000 
B)  $700,000 
C)  $750,000 
D)  $775,000

Question 17

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that 2016 is a "stale" year?
$$\begin{array} { c c c c c c c } 
\text { Year } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 500,000 & \$  600,000 & \$ 700,000 & \$ 400,000 & \$ 700,000
\end{array}$$

Accepted Answer

A)  $400,000 
B)  $580,000 
C)  $625,000 
D)  $700,000 
A)  $400,000 
B)  $580,000 
C)  $625,000 
D)  $700,000

Question 18

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach?
$$\begin{array} { c c c c c c c } 
\text { YEar } & 2013 & 2014 & 2015 & 2016 & 2017 \
\text { Sales } & \$ 4,300,000 & \$ 3,950,000 & \$ 2,100,000 & \$ 2,000,000 & 2,200,000
\end{array}$$

Accepted Answer

A)  $2,730,000 
B)  $2,810,000 
C)  $2,910,000 
D)  $2,990,000 
A)  $2,730,000 
B)  $2,810,000 
C)  $2,910,000 
D)  $2,990,000

Question 19

The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

Accepted Answer

A)  Base case projections 
B)  Deseasonalized financial statements 
C)  Naïve financial statements 
D)  Pro forma financial statements 
A)  Base case projections 
B)  Deseasonalized financial statements 
C)  Naïve financial statements 
D)  Pro forma financial statements

Question 20

Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 million next year. If all assets and current liabilities are expected to grow with sales, how much will spontaneous liabilities increase with the increase in sales?
$$\begin{array} { l r l r r } 
 \text { Assets } && { \text { Iiabilities ard Equity } } \
\text { Current Assets } & \$ 2,000,000 & \text { Current Liabilities } & \$ 2,500,000 \
\text { Fixed Assets } &  8,000,000 & \text { Long-tern Debt } &1,5000,000 \
& & \text { Equity } & 6,000,000 \
\text { Total Assets } & \$ 10,000,000 & \text { Total Liabilities and Equity } & \$ 10,000,000
\end{array}$$

Accepted Answer

A)  $833,333 
B)  $240,000 
C)  $366,957.14 
D)  $1,125,000 
A)  $833,333 
B)  $240,000 
C)  $366,957.14 
D)  $1,125,000

What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S0)?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach? YEar 2013 2014 2015 2016 2017 Sales \ 2,500,000 \ 3,750,000 \ 2,400,000 \ 2,000,000 2,900,000

________ is relevant assets divided by current sales.

Which of the following statements is incorrect?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach? Year 2013 2014 2015 2016 2017 Sales \ 50,000 \ 100,000 \ 110,000 \ 150,000 \ 165,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend? Year 2013 2014 2015 2016 2017 Sales \ 2,500,000 \ 2,800,000 \ 2,200,000 \ 2,400,000 \ 2,600,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it was determined that 2013 is a "stale" year? Year 2013 2014 2015 2016 2017 Sales \ 1,000,000 \ 2,000,000 \ 1,700,000 \ 1,800,000 \ 2,200,000

Which of the following statements are a reason for base case projections?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that none of the years are "stale"? Year 2013 2014 2015 2016 2017 Sales \ 1,600,000 \ 1,500,000 \ 1,700,000 \ 1,700,000 1,800,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? Year 2013 2014 2015 2016 2017 Sales \ 500,000 \ 600,000 \ 700,000 \ 400,000 \ 700,000

Which of the following statements is correct?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? Year 2013 2014 2015 2016 2017 Sales \ 500,000 \ 750,000 \ 700,000 \ 750,000 \ 775,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that 2016 is a "stale" year? Year 2013 2014 2015 2016 2017 Sales \ 500,000 \ 600,000 \ 700,000 \ 400,000 \ 700,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? YEar 2013 2014 2015 2016 2017 Sales \ 4,300,000 \ 3,950,000 \ 2,100,000 \ 2,000,000 2,200,000

The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 15: Financial Planning and Forecasting

What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S0)?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach? YEar 2013 2014 2015 2016 2017 Sales \ 2,500,000 \ 3,750,000 \ 2,400,000 \ 2,000,000 2,900,000

________ is relevant assets divided by current sales.

Which of the following statements is incorrect?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach? Year 2013 2014 2015 2016 2017 Sales \ 50,000 \ 100,000 \ 110,000 \ 150,000 \ 165,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using regression to estimate a trend? Year 2013 2014 2015 2016 2017 Sales \ 2,500,000 \ 2,800,000 \ 2,200,000 \ 2,400,000 \ 2,600,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it was determined that 2013 is a "stale" year? Year 2013 2014 2015 2016 2017 Sales \ 1,000,000 \ 2,000,000 \ 1,700,000 \ 1,800,000 \ 2,200,000

Which of the following statements are a reason for base case projections?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that none of the years are "stale"? Year 2013 2014 2015 2016 2017 Sales \ 1,600,000 \ 1,500,000 \ 1,700,000 \ 1,700,000 1,800,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? Year 2013 2014 2015 2016 2017 Sales \ 500,000 \ 600,000 \ 700,000 \ 400,000 \ 700,000

Which of the following statements is correct?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? Year 2013 2014 2015 2016 2017 Sales \ 500,000 \ 750,000 \ 700,000 \ 750,000 \ 775,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach if it is determined that 2016 is a "stale" year? Year 2013 2014 2015 2016 2017 Sales \ 500,000 \ 600,000 \ 700,000 \ 400,000 \ 700,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? YEar 2013 2014 2015 2016 2017 Sales \ 4,300,000 \ 3,950,000 \ 2,100,000 \ 2,000,000 2,200,000

The set of assumptions underlying the firm's financial plan and the resulting projected financial statements are accordingly often referred to as which of the following?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters