Question 1

The effects of a change in sales on working capital will be seen in which section of a financial plan:

Accepted Answer

A)  Output section 
B)  Pro forma financial statements 
C)  Planning model 
D)  Sources and uses of funds 
A)  Output section 
B)  Pro forma financial statements 
C)  Planning model 
D)  Sources and uses of funds

Question 2

A firm's sustainable growth rate represents the:

Accepted Answer

A)  Highest growth rate without decreasing the dividend 
B)  Highest growth rate without increasing financial leverage 
C)  Percentage change in sales times the profit margin 
D)  Possible growth without jeopardizing net working capital 
A)  Highest growth rate without decreasing the dividend 
B)  Highest growth rate without increasing financial leverage 
C)  Percentage change in sales times the profit margin 
D)  Possible growth without jeopardizing net working capital

Question 3

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

Accepted Answer

The first of three components of a finan

Question 4

If it is determined in a first-stage pro forma balance sheet that additional funding will be required,then a second-stage pro forma will decide the:

Accepted Answer

A)  Amount of the additional funds required 
B)  Financing mix of the additional funds required 
C)  Interest rate to be paid on the additional funds 
D)  Optimal mix of additional debt and equity 
A)  Amount of the additional funds required 
B)  Financing mix of the additional funds required 
C)  Interest rate to be paid on the additional funds 
D)  Optimal mix of additional debt and equity

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A firm has a debt equity ratio of 1/3,and plans to grow at an annual rate of 10%.Its return on equity is 18%.What is the maximum payout ratio that a company can maintain without resorting to new equity issue?

Accepted Answer

A)  Approximately 24% 
B)  Approximately 25% 
C)  Approximately 26% 
D)  Approximately 27% 
A)  Approximately 24% 
B)  Approximately 25% 
C)  Approximately 26% 
D)  Approximately 27%

Question 7

The outputs of a financial planning model often include:

Accepted Answer

A)  The firm's current financial statements 
B)  A range of macroeconomic forecasts 
C)  Cost projections for operating the planning models 
D)  Projected financial statements of the firm 
A)  The firm's current financial statements 
B)  A range of macroeconomic forecasts 
C)  Cost projections for operating the planning models 
D)  Projected financial statements of the firm

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  Will have a larger than average net income 
B)  Can generate a higher growth rate by raising more capital 
C)  Should increase its payout ratio 
D)  Can generate a higher growth rate without raising additional capital 
A)  Will have a larger than average net income 
B)  Can generate a higher growth rate by raising more capital 
C)  Should increase its payout ratio 
D)  Can generate a higher growth rate without raising additional capital

Question 10

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?

Accepted Answer

A)  $200,000 
B)  $500,000 
C)  $800,000 
D)  No external financing is required. 
A)  $200,000 
B)  $500,000 
C)  $800,000 
D)  No external financing is required.

Question 11

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 12

Sources and uses of funds are made equal through:

Accepted Answer

A)  A balancing item 
B)  Pro forma financial statements 
C)  Borrowing cash 
D)  Additions to retained earnings 
A)  A balancing item 
B)  Pro forma financial statements 
C)  Borrowing cash 
D)  Additions to retained earnings

Question 13

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

Accepted Answer

The first of three components of a finan

Question 14

When a firm is said to have no spare capacity,it:

Accepted Answer

A)  Has no need for new employees 
B)  Currently has no inventory available for sale 
C)  Must issue new equity to grow 
D)  Must increase fixed assets to increase sales 
A)  Has no need for new employees 
B)  Currently has no inventory available for sale 
C)  Must issue new equity to grow 
D)  Must increase fixed assets to increase sales

Question 15

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 16

If a firm's sales increased by 12% and it has no spare capacity,it must increase fixed assets by:

Accepted Answer

A)  0% 
B)  6% 
C)  9% 
D)  12% 
A)  0% 
B)  6% 
C)  9% 
D)  12%

Question 17

In long-range or strategic planning,the planning horizon is usually five years or more.Explain.
B. In fact, planners must be constantly on guard against the fascination of detail, because giving in to it means slighting crucial issues like investment strategy, debt policy, and the choice of a target dividend payout ratio.

Accepted Answer

This kind of planning deals with aggrega

Question 18

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

Accepted Answer

A)  Firm's projected growth rate 
B)  Sustainable growth rate 
C)  Plowback ratio 
D)  Amount of external financing available 
A)  Firm's projected growth rate 
B)  Sustainable growth rate 
C)  Plowback ratio 
D)  Amount of external financing available

Question 19

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

Accepted Answer

In every financial planning situation,pl

Question 20

If a firm uses external financing as a plug item,has a new capital budget of $2 million,a net income of $3 million,and a plowback ratio of 40%,how much should be raised in external funds?

Accepted Answer

A)  $200,000 
B)  $600,000 
C)  $800,000 
D)  $1,200,000 
A)  $200,000 
B)  $600,000 
C)  $800,000 
D)  $1,200,000

Exam 19: Long-Term Financial Planning

The effects of a change in sales on working capital will be seen in which section of a financial plan:

A firm's sustainable growth rate represents the:

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

If it is determined in a first-stage pro forma balance sheet that additional funding will be required,then a second-stage pro forma will decide the:

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

A firm has a debt equity ratio of 1/3,and plans to grow at an annual rate of 10%.Its return on equity is 18%.What is the maximum payout ratio that a company can maintain without resorting to new equity issue?

The outputs of a financial planning model often include:

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

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

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?

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

Sources and uses of funds are made equal through:

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

When a firm is said to have no spare capacity,it:

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?

If a firm's sales increased by 12% and it has no spare capacity,it must increase fixed assets by:

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

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

If a firm uses external financing as a plug item,has a new capital budget of $2 million,a net income of $3 million,and a plowback ratio of 40%,how much should be raised in external funds?

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