Question 1

Adaptability is not a desirable feature in financial plans.

Accepted Answer

A) True 
 B)False

Question 2

Increases in sales are typically accompanied by:

Accepted Answer

A) More than proportionate increases in fixed assets 
B) Less than proportionate decreases in debt 
C) More than proportionate decreases in dividends 
D) Less than proportionate increases in working capital 
A) More than proportionate increases in fixed assets 
B) Less than proportionate decreases in debt 
C) More than proportionate decreases in dividends 
D) Less than proportionate increases in working capital

Question 3

To avoid inconsistency, financial planners should be sure to:

Accepted Answer

A) Draw information from many resources 
B) Do all forecasting themselves 
C) Produce perfectly accurate forecasts 
D) Use forecasts based on common macroeconomic assumptions 
A) Draw information from many resources 
B) Do all forecasting themselves 
C) Produce perfectly accurate forecasts 
D) Use forecasts based on common macroeconomic assumptions

Question 4

Which statement is correct for a firm that forecasts net income of $200,000 and a reduction in retained earnings of $50,000?

Accepted Answer

A) Dividends will total $150,000 
B) The plowback ratio is 25% 
C) The payout ratio exceeds 1.0 
D) This combination of account changes cannot occur 
A) Dividends will total $150,000 
B) The plowback ratio is 25% 
C) The payout ratio exceeds 1.0 
D) This combination of account changes cannot occur

Question 5

The decision to acquire fixed assets is unrelated to the current level of excess capacity.

Accepted Answer

A) True 
 B)False

Question 6

Comebaq Computers is aiming to increase its market share by slashing the price of its new range of personal computers.Are costs and assets likely to increase or decrease as a proportion of sales? Explain.

Accepted Answer

If the firm reduces prices, sales revenu

Question 7

Pro forma statements are:

Accepted Answer

A) Plans developed by a Certified Financial Planner 
B) The inputs in the financial planning process 
C) Projected financial statements 
D) Deviations in results from previous financial plans 
A) Plans developed by a Certified Financial Planner 
B) The inputs in the financial planning process 
C) Projected financial statements 
D) Deviations in results from previous financial plans

Question 8

Which of the following statements is not true regarding financial planning models?

Accepted Answer

A) They should include as much detail as possible 
B) The results of a model are pro forma financial statements 
C) The plug variable maintains consistency 
D) Financial analysis is not used in financial planning 
A) They should include as much detail as possible 
B) The results of a model are pro forma financial statements 
C) The plug variable maintains consistency 
D) Financial analysis is not used in financial planning

Question 9

The flexibility of financial plans is evident in the extent that:

Accepted Answer

A) Actual profits will deviate from projected profits 
B) The plans can be adapted when conditions change 
C) Use of the plans can be extended 
D) Planning output is the same regardless of economic conditions 
A) Actual profits will deviate from projected profits 
B) The plans can be adapted when conditions change 
C) Use of the plans can be extended 
D) Planning output is the same regardless of economic conditions

Question 10

In a financial planning model:

Accepted Answer

A) Inputs are used to create the model 
B) Financial ratios are used to create the model 
C) Financial ratios are used to develop forecasts 
D) Equations are used to develop financial statements 
A) Inputs are used to create the model 
B) Financial ratios are used to create the model 
C) Financial ratios are used to develop forecasts 
D) Equations are used to develop financial statements

Question 11

Financial planning is necessary because financing and investment decisions interact and should not be made independently.

Accepted Answer

A) True 
 B)False

Question 12

Why is it uncommon to expect assets to change proportionately with sales?

Accepted Answer

This question can be answered by focusin

Question 13

Which of the following does not provide a "solution" to a projected growth rate in assets that exceeds the sustainable growth rate?

Accepted Answer

A) Increase the ROE 
B) Allow the debt-equity ratio to increase 
C) Increase the payout ratio 
D) Issue new equity 
A) Increase the ROE 
B) Allow the debt-equity ratio to increase 
C) Increase the payout ratio 
D) Issue new equity

Question 14

What is the maximum internal growth rate consistent with not requiring external funding for a firm reporting net income of $500,000, a dividend payout ratio of 40%, and total assets of $10 million?

Accepted Answer

A) 2% 
B) 3% 
C) 5% 
D) 6% 
A) 2% 
B) 3% 
C) 5% 
D) 6%

Question 15

Describe the role of a balancing item or "plug" in financial planning.

Accepted Answer

In every financial planning situation, p

Question 16

The rate at which the assets of a firm can grow without the requirement of external sources of financing is the:

Accepted Answer

A) Internal growth rate 
B) Sustainable growth rate 
C) Pro forma growth rate 
D) Plowback rate 
A) Internal growth rate 
B) Sustainable growth rate 
C) Pro forma growth rate 
D) Plowback rate

Question 17

Which of the following is correct when a firm's pro forma statements project a net income of $5,000 and an external financing requirement of $2,000?

Accepted Answer

A) Dividends cannot exceed $3,000 
B) Total assets cannot grow by more than $3,000 
C) Retained earnings cannot grow by more than $5,000 
D) The internal growth rate is 60% 
A) Dividends cannot exceed $3,000 
B) Total assets cannot grow by more than $3,000 
C) Retained earnings cannot grow by more than $5,000 
D) The internal growth rate is 60%

Question 18

The firm's current financial statements would be included in:

Accepted Answer

A) The inputs of a financial plan. 
B) The planning model for the financial plan. 
C) The outputs of the financial plan. 
D) No part of the financial plan. 
A) The inputs of a financial plan. 
B) The planning model for the financial plan. 
C) The outputs of the financial plan. 
D) No part of the financial plan.

Question 19

Calculate the sustainable growth rate for a firm with an 8% profit margin, an asset turnover of 1.25, a total debt ratio of 45%, and a plowback ratio of 65%.Assuming that the ROE remains constant, how large can the sustainable growth rate become?

Accepted Answer

Sustainable growth = plowback ration × R

Question 20

A firm with 30% total debt ratio, total assets of $10 million, and an ROE of 14% has been paying out 60% of earnings to shareholders in the form of dividends.Sales are expected to increase by 10% this year, a faster growth rate than usual.Will external funding be required under these conditions? Will the debt-equity ratio remain constant?

Accepted Answer

Yes, external funds will be required in

Exam 19: Long-Term Financial Planning

Adaptability is not a desirable feature in financial plans.

Increases in sales are typically accompanied by:

To avoid inconsistency, financial planners should be sure to:

Which statement is correct for a firm that forecasts net income of $200,000 and a reduction in retained earnings of $50,000?

The decision to acquire fixed assets is unrelated to the current level of excess capacity.

Comebaq Computers is aiming to increase its market share by slashing the price of its new range of personal computers.Are costs and assets likely to increase or decrease as a proportion of sales? Explain.

Pro forma statements are:

Which of the following statements is not true regarding financial planning models?

The flexibility of financial plans is evident in the extent that:

In a financial planning model:

Financial planning is necessary because financing and investment decisions interact and should not be made independently.

Why is it uncommon to expect assets to change proportionately with sales?

Which of the following does not provide a "solution" to a projected growth rate in assets that exceeds the sustainable growth rate?

What is the maximum internal growth rate consistent with not requiring external funding for a firm reporting net income of $500,000, a dividend payout ratio of 40%, and total assets of $10 million?

Describe the role of a balancing item or "plug" in financial planning.

The rate at which the assets of a firm can grow without the requirement of external sources of financing is the:

Which of the following is correct when a firm's pro forma statements project a net income of $5,000 and an external financing requirement of $2,000?

The firm's current financial statements would be included in:

Calculate the sustainable growth rate for a firm with an 8% profit margin, an asset turnover of 1.25, a total debt ratio of 45%, and a plowback ratio of 65%.Assuming that the ROE remains constant, how large can the sustainable growth rate become?

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