Question 1

The observation that additions to fixed assets are "lumpier" than additions to current assets indicates that:

Accepted Answer

A) Fixed assets depreciate over time 
B) Fixed assets can only be acquired through external funding 
C) Current assets can be acquired in smaller increments 
D) Dollar for dollar, fixed assets are more expensive than current assets 
A) Fixed assets depreciate over time 
B) Fixed assets can only be acquired through external funding 
C) Current assets can be acquired in smaller increments 
D) Dollar for dollar, fixed assets are more expensive than current assets

Question 2

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

Accepted Answer

Higher growth rates will lead to greater

Question 3

Why is it uncommon to expect assets to change proportionately with sales?

Accepted Answer

This question can be answered by focusin

Question 4

What are the contents and uses of a financial plan?
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

Most firms take financial planning serio

Question 5

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% Sustainable growth rate = plowback ratio x ROE
= (1 - payout ratio) x ROE
= 
A) 3.0% 
B) 5.4% 
C) 7.2% 
D) 10.8% Sustainable growth rate = plowback ratio x ROE
= (1 - payout ratio) x ROE
=

Question 6

If a firm with an asset base of $3 million recently added $150,000 to retained earnings after a dividend payment of $100,000, then its internal growth rate is:

Accepted Answer

A) 1.67% 
B) 3.33% 
C) 5.00% 
D) 8.33% 
A) 1.67% 
B) 3.33% 
C) 5.00% 
D) 8.33%

Question 7

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 8

Why do current or fixed assets often not vary proportionately with sales?

Accepted Answer

This question can be answered by focusin

Question 9

Managers sometimes state a target growth rate for sales or earnings per share.Do you think that either makes sense as a corporate goal? If not, why do you think that managers focus on them?

Accepted Answer

Neither the growth rate of earnings nor

Question 10

Prove that "sustainable growth rate = plowback ratio x return on equity."

Accepted Answer

Required equity issues = growth rate x a

Question 11

Calculate the plowback ratio given the following:

Accepted Answer

A) 53% 
B) 50% 
C) 43% 
D) 40% 
A) 53% 
B) 50% 
C) 43% 
D) 40%

Question 12

The decision to acquire fixed assets is unrelated to the current level of excess capacity.

Accepted Answer

A) True 
 B)False

Question 13

Financial planning should attempt to minimize risk.

Accepted Answer

A) True 
 B)False

Question 14

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% sustainable growth rate = plowback ratio x ROE
= 60% x ($250,000/$1 million)
= 60% x 25%
= 15% 
A) 8% 
B) 10% 
C) 15% 
D) 17% sustainable growth rate = plowback ratio x ROE
= 60% x ($250,000/$1 million)
= 60% x 25%
= 15%

Question 15

Calculate the rate at which the firm can grow without changing its leverage if its payout ratio is 70%, equity outstanding at the beginning of the year is $900,000, and its net income for the year is $150,000:

Accepted Answer

A) 5.00% 
B) 11.67% 
C) 14.00% 
D) 16.67% ROE = 150,000/900,000 = 16.67%
Internal growth rate = 0.30 x 0.1667 
A) 5.00% 
B) 11.67% 
C) 14.00% 
D) 16.67% ROE = 150,000/900,000 = 16.67%
Internal growth rate = 0.30 x 0.1667

Question 16

Calculate ROE given the following information:

Accepted Answer

A) 21.33% 
B) 20.33% 
C) 19.33% 
D) 18.33% 
A) 21.33% 
B) 20.33% 
C) 19.33% 
D) 18.33%

Question 17

Debt can be used as a plug item in financial planning.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Planners have determined that sales will increase by 20% next year, and that the profit margin will remain at 10% of sales.Which of the following statements is correct?

Accepted Answer

A) Profit will grow by 20% 
B) The profit margin will grow by 10% 
C) Profit will grow proportionately faster than sales 
D) 10% of the increase in sales will become net income 
A) Profit will grow by 20% 
B) The profit margin will grow by 10% 
C) Profit will grow proportionately faster than sales 
D) 10% of the increase in sales will become net income

Question 20

Which of the following is not typically included among the three major requirements for effective planning?

Accepted Answer

A) Financing the plan 
B) Selecting the best plan 
C) Observing the plan unfold 
D) Forecasting 
A) Financing the plan 
B) Selecting the best plan 
C) Observing the plan unfold 
D) Forecasting

Exam 19: Short-Term Financial Planning

The observation that additions to fixed assets are "lumpier" than additions to current assets indicates that:

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

Why is it uncommon to expect assets to change proportionately with sales?

What are the contents and uses of a financial plan? 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.

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%?

If a firm with an asset base of $3 million recently added $150,000 to retained earnings after a dividend payment of $100,000, then its internal growth rate is:

Pro forma statements are:

Why do current or fixed assets often not vary proportionately with sales?

Managers sometimes state a target growth rate for sales or earnings per share.Do you think that either makes sense as a corporate goal? If not, why do you think that managers focus on them?

Prove that "sustainable growth rate = plowback ratio x return on equity."

Calculate the plowback ratio given the following:

The decision to acquire fixed assets is unrelated to the current level of excess capacity.

Financial planning should attempt to minimize risk.

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?

Calculate the rate at which the firm can grow without changing its leverage if its payout ratio is 70%, equity outstanding at the beginning of the year is $900,000, and its net income for the year is $150,000:

Calculate ROE given the following information:

Debt can be used as a plug item in financial planning.

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

Planners have determined that sales will increase by 20% next year, and that the profit margin will remain at 10% of sales.Which of the following statements is correct?

Which of the following is not typically included among the three major requirements for effective planning?

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

Filters