Exam 19: Short-Term Financial Planning

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:

Outputs from a financial plan would include such items as:

A major focus of financial planning is to:

A firm has set its target capital structure at 40% debt.Further, it intends to continue with a 30% dividend payout.Finally, it hopes to maintain a constant growth rate of 7%.If the profit margin and asset turnover are currently 8% and .9 respectively, do the constraints sound realistic? If not, what might you suggest?

Which of the following changes will decrease a firm's internal growth rate?

For a firm with $3 million in total assets, $400,000 in net income, and $150,000 in dividend payments, first calculate the maximum rate of growth in sales without tapping external sources of funds.Next, show how that growth rate changes if the dividend payout ratio is reduced to 20%.Do these two points suggest that shareholders must be willing to trade dividends for growth?

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

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

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

What amount of debt should a firm include in its financing mix in order to achieve a sustainable growth rate of 9% while maintaining a 40% dividend payout, a 10% profit margin, and an asset turnover of 1.5?

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

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%?

To avoid inconsistency, financial planners should be sure to:

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

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

If the projected growth rate is smaller than the firm's sustainable growth rate:

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

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

In a financial planning model:

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