Question 1

Given the data collected for Thaj Corporation, calculate the sustainable growth rate.

Accepted Answer

A) 9.26% 
B) 8.26% 
C) 7.26% 
D) 6.26% 
E) 5.26%
  
A) 9.26% 
B) 8.26% 
C) 7.26% 
D) 6.26% 
E) 5.26%

Question 2

Which of the following would be included as inputs to a firm's financial plan?

Accepted Answer

A) Capital, plant and labour resources 
B) The firm's current product line 
C) The current balance of retained earnings 
D) Sales and economic forecasts 
A) Capital, plant and labour resources 
B) The firm's current product line 
C) The current balance of retained earnings 
D) Sales and economic forecasts

Question 3

When most of the elements of a financial plan are related to sales levels, the plan is:

Accepted Answer

A) Less likely to be effective 
B) Using sales as a plug figure 
C) A percentage of sales model 
D) Not adjusted for inflation 
A) Less likely to be effective 
B) Using sales as a plug figure 
C) A percentage of sales model 
D) Not adjusted for inflation

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

A firm cannot expect to expand its profit margin by acquiring one of its own suppliers.

Accepted Answer

A) True 
 B)False

Question 7

A forecast using a percentage of sales model expects sales to increase by 20% over 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:

Accepted Answer

A) $48.62 
B) $145.86 
C) $227.60 
D) $243.10 
A) $48.62 
B) $145.86 
C) $227.60 
D) $243.10

Question 8

Financial plans will succeed only if the forecasts are perfect.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

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 12

Firms that do not have to secure financing to carry out their financial plans are said to have:

Accepted Answer

A) Excessive hordes of cash 
B) Financial slack. 
C) Low plans for investing 
D) Deteriorating credit quality 
A) Excessive hordes of cash 
B) Financial slack. 
C) Low plans for investing 
D) Deteriorating credit quality

Question 13

A planner's percentage of sales model forecasts that sales will grow by 20% next year.If costs of goods sold are proportionate at 70% of sales, then costs of goods sold will:

Accepted Answer

A) Grow to 90% of sales 
B) Grow in dollars by 70% 
C) Not change in dollar amount 
D) Increase by 20% in dollar terms 
A) Grow to 90% of sales 
B) Grow in dollars by 70% 
C) Not change in dollar amount 
D) Increase by 20% in dollar terms

Question 14

An all equity financed firm has an asset turnover of 2 and its plowback ratio is 50%.Determine its net profit in order to finance a 10% internally generated growth.

Accepted Answer

A) 11% 
B) 10% 
C) 9% 
D) 8% Internal growth rate = Plowback ratio * ROEBEG *
Since the firm is all-equity financed, Equity/Assets = 1 and
ROEBEG = ROABEG = Net profit margin *Asset turnover.
Therefore, g = Plowback ratio * Net profit margin * Asset turnover
)08 =.5 * Net profit margin * 2.0
Net profit margin = .08 = 8% 
A) 11% 
B) 10% 
C) 9% 
D) 8% Internal growth rate = Plowback ratio * ROEBEG *
Since the firm is all-equity financed, Equity/Assets = 1 and
ROEBEG = ROABEG = Net profit margin *Asset turnover.
Therefore, g = Plowback ratio * Net profit margin * Asset turnover
)08 =.5 * Net profit margin * 2.0
Net profit margin = .08 = 8%

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Sensitivity analysis is used to:

Accepted Answer

A) Look at the consequence of varying many different assumptions at the same time 
B) Predict the consequences of the business plan under the most likely set of circumstances 
C) Vary assumptions, one at a time, in order to see their consequences on the business plan 
D) Forecast demand if interest rates increase and a recession hits the economy 
A) Look at the consequence of varying many different assumptions at the same time 
B) Predict the consequences of the business plan under the most likely set of circumstances 
C) Vary assumptions, one at a time, in order to see their consequences on the business plan 
D) Forecast demand if interest rates increase and a recession hits the economy

Question 17

Financial planning is concerned with possible surprises as well as the most likely outcomes.

Accepted Answer

A) True 
 B)False

Question 18

Why is it important that financial plans incorporate adaptability?

Accepted Answer

Even in the case of developing financial

Question 19

Given the data collected for Marion Corporation, calculate the following: (a) sustainable growth rate.(b) If the company does grow at this rate, determine the new borrowing that needs to occur.(c) What growth rate could be supported with no outside financing?

Accepted Answer

The answer of Given the data collected for Marion Corporation,...

Question 20

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

Exam 19: Short-Term Financial Planning

Given the data collected for Thaj Corporation, calculate the sustainable growth rate.

Which of the following would be included as inputs to a firm's financial plan?

When most of the elements of a financial plan are related to sales levels, the plan is:

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

Sources and uses of funds are made equal through:

A firm cannot expect to expand its profit margin by acquiring one of its own suppliers.

A forecast using a percentage of sales model expects sales to increase by 20% over 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:

Financial plans will succeed only if the forecasts are perfect.

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:

The outputs of a financial planning model often include:

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?

Firms that do not have to secure financing to carry out their financial plans are said to have:

A planner's percentage of sales model forecasts that sales will grow by 20% next year.If costs of goods sold are proportionate at 70% of sales, then costs of goods sold will:

An all equity financed firm has an asset turnover of 2 and its plowback ratio is 50%.Determine its net profit in order to finance a 10% internally generated growth.

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

Sensitivity analysis is used to:

Financial planning is concerned with possible surprises as well as the most likely outcomes.

Why is it important that financial plans incorporate adaptability?

Given the data collected for Marion Corporation, calculate the following: (a) sustainable growth rate.(b) If the company does grow at this rate, determine the new borrowing that needs to occur.(c) What growth rate could be supported with no outside financing?

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

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

Payout Policy

Long-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

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