Exam 19: Long-Term Financial Planning

Executives at Fruit Corporation forecast increased sales of 10% over the next year.$2,000,000 of assets will change in constant proportion to sales.If the addition to retained earnings is estimated to be $50,000, determine the required external financing.

What is the maximum dividend payout ratio consistent with not requiring external funds for a firm with an ROE of 15%, a debt-equity ratio of 50%, and an annual sales growth objective of 9%?

What are the contents and uses of a financial plan?

Financial plans covering a short planning horizon rarely extend beyond:

If sales growth for XYZ Corporation exceeds 6%, which in turn causes XYZ to seek external financing, then 6% is the:

What is the sustainable growth rate for a firm with net income of $2.5 million, cash dividends of $1.5 million, and return on equity of 18%?

What is the effect of growth on the need for external financing?

Relative to its assets, a firm with a large volume of retained earnings and a high ROE:

List and briefly describe the components of a financial planning model.

A common, long-term corporate financial planning horizon would stretch for 15 to 20 years.

A firm has decided that its optimal capital structure is 100% equity financed.It perceives its optimal dividend policy to be 40% payout ratio.Asset turnover is 0.8.The net profit margin is 10%, and the firm has a target growth rate of 5%. a.Is the firm's target growth rate consistent with its other goals? b.By how much does the company need to change its asset turnover to achieve this goal? c.By how much does the company need to increase the profit margin instead?

Why is it important that financial plans incorporate adaptability?

Financial planning is a process of deciding which risks to take.

The primary aim of financial planning is to obtain better forecasts of future cash flows and earnings.

How much is required in external financing if first-stage pro forma statements indicate $1 million in net income, $300,000 in dividends, and a $900,000 increase in total assets?

Which of the following statements is correct for a firm that has a sustainable growth rate that exceeds its projected growth rate in assets?

The dividend payout ratio is directly related to a firm's internal growth rate.

A forecast using a percentage of sales model expects sales to increase by 5% over each of the next four years.If costs are proportional to sales at 80%, and last year's sales were $1,000, the net income in the fourth year will be:

What is the required asset turnover for a firm with a 12% profit margin, 50% equity, and a 40% dividend payout that wishes to grow at 6% using only internal funding?

Which of the following is not a reason for building financial plans?