Clayton Industries is planning its operations for next year.Ronnie Clayton,the CEO,wants you to forecast the firm's additional funds needed (AFN).Data for use in your forecast are shown below.Based on the AFN equation,what is the AFN for the coming year? Dollars are in millions. $\begin{array}{lrlr} \text { Last year's sales }=\mathrm{S}_{0} & \$ 350 & \text { Last yr's accounts payable } & \$ 40 \\ \text { Sales growth rate }=\mathrm{g} & 30 \% & \text { Last yr's notes payable } & \$ 50 \\ \text { Last year's total assets }=\mathrm{A}_{0}{ }^{*} & \$ 360 & \text { Last yr's accruals } & \$ 30 \\ \text { Last year's prof margin }=\mathrm{PM} & 5 \% & \text { Target payout ratio } & 60 \% \end{array}$ ?

A) $67.0 B) $78.7 C) $63.9 D) $77.9 E) $91.1 A) $67.0 B) $78.7 C) $63.9 D) $77.9 E) $91.1

Chua Chang & Wu Inc.is planning its operations for next year,and the CEO wants you to forecast the firm's additional funds needed (AFN).Data for use in your forecast are shown below.Based on the AFN equation,what is the AFN for the coming year? $\begin{array}{llll} \text { Last year's sales }=\mathrm{S}_{0} & \$ 200,000 & \text { Last year's accounts payable } &\$ 50,000 \\ \text { Sal es growth rate }=\mathrm{g} & 40 \% & \text { Last year's notes payable } & \$ 15,000 \\ \text { Last year's total assets }=\mathrm{A}_{0} * & \$ 127,500 & \text { Last year's accruals } & \$ 20,000 \\ \text { Last year's profit margin }=\mathrm{PM} & 20.0 \% & \text { Target payout ratio } & 25.0 \% \end{array}$ ?

A) -$14,820 B) -$23,180 C) -$19,000 D) -$21,280 E) -$20,520 A) -$14,820 B) -$23,180 C) -$19,000 D) -$21,280 E) -$20,520

Exam 17: Financial Planning and Forecasting

Jefferson City Computers has developed a forecasting model to estimate its AFN for the upcoming year.All else being equal,which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)?

(Multiple Choice)

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Question 21

Last year Godinho Corp.had $420 million of sales,and it had $75 million of fixed assets that were being operated at 80% of capacity.In millions,how large could sales have been if the company had operated at full capacity?

(Multiple Choice)

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Question 22

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 23

Which of the following is NOT a key element in strategic planning as it is described in the text?

(Multiple Choice)

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Question 24

Errors in the sales forecast can be offset by similar errors in costs and income forecasts.Thus,as long as the errors are not large,sales forecast accuracy is not critical to the firm.

(True/False)

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Question 25

Last year Jain Technologies had $250 million of sales and $100 million of fixed assets,so its Fixed Assets/Sales ratio was 40%.However,its fixed assets were used at only 40% of capacity.Now the company is developing its financial forecast for the coming year.As part of that process,the company wants to set its target Fixed Assets/Sales ratio at the level,it would have had,had it been operating at full capacity.What target Fixed Assets/Sales ratio should the company set?

(Multiple Choice)

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Question 26

If a firm wants to maintain its ratios at their existing levels,then if it has a positive sales growth rate of any amount,it will require some amount of external funding.

(True/False)

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Question 27

When we use the AFN equation to forecast the additional funds needed (AFN),we are implicitly assuming that all financial ratios are constant.If financial ratios are not constant,regression techniques can be used to improve the financial forecast.

(True/False)

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Question 28

Fairchild Garden Supply expects $700 million of sales this year,and it forecasts a 15% increase for next year.The CFO uses this equation to forecast inventory requirements at different levels of sales: Inventories = $30.2 + 0.25(Sales).All dollars are in millions.What is the projected inventory turnover ratio for the coming year?

(Multiple Choice)

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Question 29

Which of the following is NOT one of the steps taken in the financial planning process?

(Multiple Choice)

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Question 30

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 31

Last year Handorf-Zhu Inc.had $850 million of sales,and it had $425 million of fixed assets that were used at only 85% of capacity.What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?

(Multiple Choice)

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Question 32

Clayton Industries is planning its operations for next year.Ronnie Clayton,the CEO,wants you to forecast the firm's additional funds needed (AFN).Data for use in your forecast are shown below.Based on the AFN equation,what is the AFN for the coming year? Dollars are in millions. Last year's sales = \ 350 Last yr's accounts payable \ 40 Sales growth rate = 30\% Last yr's notes payable \ 50 Last year's total assets = \ 360 Last yr's accruals \ 30 Last year's prof margin = 5\% Target payout ratio 60\% ?

(Multiple Choice)

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Question 33

Chua Chang & Wu Inc.is planning its operations for next year,and the CEO wants you to forecast the firm's additional funds needed (AFN).Data for use in your forecast are shown below.Based on the AFN equation,what is the AFN for the coming year? Last year's sales = \ 200,000 Last year's accounts payable \ 50,000 Sal es growth rate = 40\% Last year's notes payable \ 15,000 Last year's total assets =* \ 127,500 Last year's accruals \ 20,000 Last year's profit margin = 20.0\% Target payout ratio 25.0\% ?

(Multiple Choice)

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Question 34

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 35

Last year Emery Industries had $450 million of sales and $225 million of fixed assets,so its Fixed Assets/Sales ratio was 50%.However,its fixed assets were used at only 65% of capacity.If the company had been able to sell off enough of its fixed assets at book value so that it was operating at full capacity,with sales held constant at $450 million,how much cash (in millions)would it have generated?

(Multiple Choice)

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Question 36

Two firms with identical capital intensity ratios are generating the same amount of sales.However,Firm A is operating at full capacity,while Firm B is operating below capacity.If the two firms expect the same growth in sales during the next period,then Firm A is likely to need more additional funds than Firm B,other things held constant.

(True/False)

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Question 37

A rapid build-up of inventories normally requires additional financing,unless the increase is matched by an equally large decrease in some other asset.

(True/False)

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Question 38

The capital intensity ratio is generally defined as follows:

(Multiple Choice)

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Question 39

Showing 21 - 39 of 39

Jefferson City Computers has developed a forecasting model to estimate its AFN for the upcoming year.All else being equal,which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)?

Last year Godinho Corp.had $420 million of sales,and it had $75 million of fixed assets that were being operated at 80% of capacity.In millions,how large could sales have been if the company had operated at full capacity?

Which of the following statements is CORRECT?

Which of the following is NOT a key element in strategic planning as it is described in the text?

Errors in the sales forecast can be offset by similar errors in costs and income forecasts.Thus,as long as the errors are not large,sales forecast accuracy is not critical to the firm.

If a firm wants to maintain its ratios at their existing levels,then if it has a positive sales growth rate of any amount,it will require some amount of external funding.

When we use the AFN equation to forecast the additional funds needed (AFN),we are implicitly assuming that all financial ratios are constant.If financial ratios are not constant,regression techniques can be used to improve the financial forecast.

Which of the following is NOT one of the steps taken in the financial planning process?

Which of the following statements is CORRECT?

Last year Handorf-Zhu Inc.had $850 million of sales,and it had $425 million of fixed assets that were used at only 85% of capacity.What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?

Which of the following statements is CORRECT?

A rapid build-up of inventories normally requires additional financing,unless the increase is matched by an equally large decrease in some other asset.

The capital intensity ratio is generally defined as follows:

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements,cash Flow and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock,leasing,warrants,and Convertibles

Mergers and Acquisitions

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