Exam 4: Long-Term Financial Planning and Growth

Urban's, which is currently operating at full capacity, has sales of $47,000, current assets of $5,100, current liabilities of $6,200, net fixed assets of $51,500, and a profit margin of 5 percent. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 3 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?

Pro forma statements:

All else constant, a(n) ________ will increase the internal rate of growth.

Christina's has a profit margin of 7.5 percent, a capital intensity ratio of .8, a debt-equity ratio of .6, net income of $31,000, and dividends paid of $15,810. What is the sustainable rate of growth?

Assume a firm is currently operating at 98 percent of capacity with sales of $28,400. Next year, sales are projected to increase to $35,000. What is the projected addition to fixed assets if the firm currently has fixed assets of $16,900 and total assets of $24,600?

The Mill Press is operating at 94 percent of its fixed asset capacity and has current sales of $611,000. How much can the firm grow before any new fixed assets are needed?

When developing a financial plan for a corporation you should consider which of the following? 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?

Nielsen's has annual sales of $352,400 and a profit margin of 5.2 percent. The firm has beginning owners' equity of $136,400 and ending owners' equity of $139,900. The firm neither sold nor repurchased shares during the year. What is the firm's retention ratio?

Financial planning:

The maximum rate of growth a corporation can achieve can be increased by:

Which one of the following are you most apt to estimate first as you begin the process of preparing pro forma statements?

Muder's Market has sales of $28,400, net income of $2,250, and a retention ratio of 60 percent. Assume the profit margin and the payout ratio are constant and sales increase by 6 percent. What is the pro forma retained earnings if the current retained earnings balance is $4,100?

Country Comfort, Inc. has equity of $168,500, total assets of $195,000, net income of $63,000, and dividends of $37,800. What is the sustainable growth rate?

When planning for the long run, the planning horizon is usually a period of:

When utilizing the percentage of sales approach, managers:

Next year's pro forma statement is based on an annual increase in sales of four percent. The firm is currently operating at 85 percent of capacity. Net working capital and all costs vary directly with sales. The tax rate and the dividend payout ratio are fixed. Given this information, the:

Nu Tek has sales of $19,700, net income of $3,517, fixed assets of $18,282, current liabilities of $2,940, current assets of $3,018, long-term debt of $7,600, and equity of $10,760. 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. Next year's sales are projected to increase by 7 percent. What is the amount of external financing needed if the firm is currently operating at full capacity?

Jamestowne Boats has a profit margin of 6.2 percent, a payout ratio of 30 percent, an ROA of 14.2 percent, and an ROE of 18.6 percent. This firm maintains a constant payout ratio and is currently operating at full capacity. What is the maximum rate at which the firm can grow without acquiring any additional external financing?

The Dog House has net income of $3,450 and total equity of $8,600. The debt-equity ratio is .60 and the payout ratio is 30 percent. What is the internal growth rate?

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 .64. What is the profit margin?