Exam 19: Long-Term Financial Planning

Managers sometimes state a target growth rate for sales or earnings per share.Do you think that either makes sense as a corporate goal? If not, why do you think that managers focus on them?

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Question 1

Correct Answer:

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Neither the growth rate of earnings nor the growth rate of sales translates generally into value maximizing policies for the firm; in this sense a focus on these variables is not an appropriate corporate goal.Nevertheless, targets for these growth rates might be convenient ways to signal the belief that, in a particular situation, increasing a variable like sales could be value enhancing.Moreover, focusing on a particular variable like sales growth might provide a guideline as to what aspect of corporate performance requires the most attention.These growth rates might be viewed as easily communicated proxies for factors that are more fundamental concerns of management.

Planners have determined that sales will increase by 20% next year, and that the profit margin will remain at 10% of sales.Which of the following statements is correct?

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Question 2

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A planning horizon refers to the amount of time necessary to develop the financial plan.

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Question 3

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False

A major difference between financial planning and forecasting is that financial planning:

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Question 4

A firm's required external financing is determined by the:

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Question 5

One potential difficulty with expressing plan objectives in the form of specific profit margins is that:

(Multiple Choice)

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Question 6

With respect to the balance sheet, an increase in equity of $2,000 with an increase in net income to $2,500, leads us to believe:

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Question 7

A typical horizon for long-term planning is five years.

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Question 8

How are financial planning models constructed?

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Question 9

The implications of the forecasts from a financial plan are determined by the:

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Question 10

Outputs from a financial plan would include such items as:

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Question 11

An all equity financed firm has an asset turnover of 2 and its plowback ratio is 50%.Determine its net profit in order to finance a 8% internally generated growth.

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Question 12

Given the data collected for Marion Corporation, calculate the following: (a) sustainable growth rate.(b) If the company does grow at this rate, determine the new borrowing that needs to occur.(c) What growth rate could be supported with no outside financing? Data: Sales 400,000 Net Income 60,000 Dividends 40,000 Total Debt 200,000 Total Equity 50,000

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Question 13

If entering a new market will not produce an immediate net present value, why would financial planners suggest entering this new market?

(Multiple Choice)

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Question 14

Financial planning models routinely adjust for present value and risk.

(True/False)

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Question 15

A firm's sustainable growth rate represents the:

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Question 16

Financial managers should be trained early in their careers to question financial forecasts.

(True/False)

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Question 17

The observation that additions to fixed assets are "lumpier" than additions to current assets indicates that:

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Question 18

Alternative "What if?" scenarios can be easily accommodated in financial planning by use of:

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Question 19

Financial planning should attempt to minimize risk.

(True/False)

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Question 20

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Exam 19: Long-Term Financial Planning

Managers sometimes state a target growth rate for sales or earnings per share.Do you think that either makes sense as a corporate goal? If not, why do you think that managers focus on them?

Planners have determined that sales will increase by 20% next year, and that the profit margin will remain at 10% of sales.Which of the following statements is correct?

A planning horizon refers to the amount of time necessary to develop the financial plan.

A major difference between financial planning and forecasting is that financial planning:

A firm's required external financing is determined by the:

One potential difficulty with expressing plan objectives in the form of specific profit margins is that:

With respect to the balance sheet, an increase in equity of $2,000 with an increase in net income to $2,500, leads us to believe:

A typical horizon for long-term planning is five years.

How are financial planning models constructed?

The implications of the forecasts from a financial plan are determined by the:

Outputs from a financial plan would include such items as:

An all equity financed firm has an asset turnover of 2 and its plowback ratio is 50%.Determine its net profit in order to finance a 8% internally generated growth.

If entering a new market will not produce an immediate net present value, why would financial planners suggest entering this new market?

Financial planning models routinely adjust for present value and risk.

A firm's sustainable growth rate represents the:

Financial managers should be trained early in their careers to question financial forecasts.

The observation that additions to fixed assets are "lumpier" than additions to current assets indicates that:

Alternative "What if?" scenarios can be easily accommodated in financial planning by use of:

Financial planning should attempt to minimize risk.

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Leasing

Payout Policy

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters