Question 1

If the pro forma balance sheet shows that total assets must increase by $400,000 while retaining a debt-equity ratio of .75 then:

Accepted Answer

A)  Debt must increase by $300,000 
B)  Equity must increase by the full $400,000 
C)  Debt must increase by $171,429 
D)  Equity must increase by $100,000 
A)  Debt must increase by $300,000 
B)  Equity must increase by the full $400,000 
C)  Debt must increase by $171,429 
D)  Equity must increase by $100,000 C

Question 2

What is the internal growth rate for a firm with an ROE of 20%,a dividend payout ratio of 40%,and an equity-debt ratio of 60%?

Accepted Answer

A)  4.50% 
B)  5.39% 
C)  8.00% 
D)  12.00% 
A)  4.50% 
B)  5.39% 
C)  8.00% 
D)  12.00% A

Question 3

Which of the following will not permit a higher internal growth rate,other things equal?

Accepted Answer

A)  A higher plowback ratio 
B)  A higher debt-to-asset ratio 
C)  A higher return on equity 
D)  A higher return on assets 
A)  A higher plowback ratio 
B)  A higher debt-to-asset ratio 
C)  A higher return on equity 
D)  A higher return on assets B

Question 4

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 5

A firm's internal growth rate of 10% means that:

Accepted Answer

A)  Sales can grow by 10% before external equity is needed 
B)  Retained earnings can increase by 10% before total assets will change 
C)  External capital will not be required unless sales growth exceeds 10% 
D)  Debt can increase by 10% before retained earnings will fall 
A)  Sales can grow by 10% before external equity is needed 
B)  Retained earnings can increase by 10% before total assets will change 
C)  External capital will not be required unless sales growth exceeds 10% 
D)  Debt can increase by 10% before retained earnings will fall

Question 6

Dave's Wax Inc.'s financial planners have projected a growth rate of 8% for the coming year.Currently,it has assets of $5,000,000 and retained earnings of $120,000.Calculate the amount of external financing Dave will need:

Accepted Answer

A)  $0 
B)  $70,000 
C)  $184,000 
D)  $280,000 
A)  $0 
B)  $70,000 
C)  $184,000 
D)  $280,000

Question 7

A major focus of financial planning is to:

Accepted Answer

A)  Minimize a firm's risk 
B)  Maximize a firm's risk 
C)  Analyze and select risks for the firm 
D)  Train the firm's management to operate without risk 
A)  Minimize a firm's risk 
B)  Maximize a firm's risk 
C)  Analyze and select risks for the firm 
D)  Train the firm's management to operate without risk

Question 8

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 9

A firm's internal growth rate is all of the following except:

Accepted Answer

A)  The rate below which external financing is needed 
B)  The ratio of retained earnings to assets 
C)  The maximum growth rate without external sources of new capital 
D)  Determined by the plowback ratio, ROE, and the ratio of equity to assets 
A)  The rate below which external financing is needed 
B)  The ratio of retained earnings to assets 
C)  The maximum growth rate without external sources of new capital 
D)  Determined by the plowback ratio, ROE, and the ratio of equity to assets

Question 10

All of the following are part of the financial planning process except:

Accepted Answer

A)  Deciding which risks are worth taking 
B)  Analyzing investment and financing options 
C)  Projecting the future 
D)  Minimizing risk 
A)  Deciding which risks are worth taking 
B)  Analyzing investment and financing options 
C)  Projecting the future 
D)  Minimizing risk

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Financial planning focuses on the big picture.

Accepted Answer

A) True 
 B)False

Question 13

What is the sustainable growth rate for a firm with $250,000 in net income,$20,000 in preferred stock dividends,$80,000 in common stock dividends,and an average equity balance of $1 million?

Accepted Answer

A)  8% 
B)  10% 
C)  15% 
D)  17% 
A)  8% 
B)  10% 
C)  15% 
D)  17%

Question 14

A potential downfall of using dividends as the plug item is that:

Accepted Answer

A)  It may give shareholders mixed signals 
B)  Dividends are constant within a planning horizon 
C)  The firm may have to borrow cash to pay dividends 
D)  Shareholders may receive an excessive return 
A)  It may give shareholders mixed signals 
B)  Dividends are constant within a planning horizon 
C)  The firm may have to borrow cash to pay dividends 
D)  Shareholders may receive an excessive return

Question 15

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%?

Accepted Answer

A)  3.0% 
B)  5.4% 
C)  7.2% 
D)  10.8% 
A)  3.0% 
B)  5.4% 
C)  7.2% 
D)  10.8%

Question 16

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

Accepted Answer

A)  Plan inputs 
B)  Balancing item 
C)  Planning model 
D)  Plowback ratio 
A)  Plan inputs 
B)  Balancing item 
C)  Planning model 
D)  Plowback ratio

Question 17

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 18

First-stage pro forma balance sheets do not determine:

Accepted Answer

A)  Whether external financing is required 
B)  The need for additional fixed assets 
C)  The amount of the balancing item 
D)  The financing mix for external funding 
A)  Whether external financing is required 
B)  The need for additional fixed assets 
C)  The amount of the balancing item 
D)  The financing mix for external funding

Question 19

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

Accepted Answer

A)  Economic conditions can change. 
B)  This gives limited guidance about the best overall strategies. 
C)  Many corporate goals are interrelated. 
D)  The margins may not be met. 
A)  Economic conditions can change. 
B)  This gives limited guidance about the best overall strategies. 
C)  Many corporate goals are interrelated. 
D)  The margins may not be met.

Question 20

Why is it important that financial plans incorporate adaptability?

Accepted Answer

Even in the case of developing financial

Exam 19: Long-Term Financial Planning

If the pro forma balance sheet shows that total assets must increase by $400,000 while retaining a debt-equity ratio of .75 then:

What is the internal growth rate for a firm with an ROE of 20%,a dividend payout ratio of 40%,and an equity-debt ratio of 60%?

Which of the following will not permit a higher internal growth rate,other things equal?

Pro forma statements are:

A firm's internal growth rate of 10% means that:

Dave's Wax Inc.'s financial planners have projected a growth rate of 8% for the coming year.Currently,it has assets of $5,000,000 and retained earnings of $120,000.Calculate the amount of external financing Dave will need:

A major focus of financial planning is to:

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

A firm's internal growth rate is all of the following except:

All of the following are part of the financial planning process except:

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

Financial planning focuses on the big picture.

What is the sustainable growth rate for a firm with $250,000 in net income,$20,000 in preferred stock dividends,$80,000 in common stock dividends,and an average equity balance of $1 million?

A potential downfall of using dividends as the plug item is that:

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%?

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

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

First-stage pro forma balance sheets do not determine:

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

Why is it important that financial plans incorporate adaptability?

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 and Payout 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