Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 4

What is the required asset turnover for a firm with a 12% profit margin,50% equity,and a 40% dividend payout that wishes to grow at 6% without increasing financial leverage?

Accepted Answer

A)  .42 
B)  .56 
C)  .63 
D)  1.00 
A)  .42 
B)  .56 
C)  .63 
D)  1.00

Question 5

Under which of the following capital structures will a firm's internal growth rate exceed its sustainable growth rate?

Accepted Answer

A)  Total debt-to-asset ratio equals 35%. 
B)  Equity-to-debt ratio equals 60%. 
C)  Equity-to-debt ratio equals 125%. 
D)  None of these. 
A)  Total debt-to-asset ratio equals 35%. 
B)  Equity-to-debt ratio equals 60%. 
C)  Equity-to-debt ratio equals 125%. 
D)  None of these.

Question 6

Adaptability is not a desirable feature in financial plans.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

This question can be answered by focusin

Question 8

Why is it important that financial plans incorporate adaptability?

Accepted Answer

Even in the case of developing financial

Question 9

Pro formas are projected or forecasted financial statements.

Accepted Answer

A) True 
 B)False

Question 10

Financial planning just means formulating the company's response to the most likely events.

Accepted Answer

A) True 
 B)False

Question 11

LittleToys has $50 million invested in fixed assets and generates sales of $60 million.Currently,the company is working at only 80% of capacity.How much can sales expand without any further investment in fixed assets? How much investment in fixed assets would be required to support a 30% expansion in sales?

Accepted Answer

Sales can increase without the need for

Question 12

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

Accepted Answer

Higher growth rates will lead to greater

Question 13

Financial planning requires accurate and consistent forecasting.

Accepted Answer

A) True 
 B)False

Question 14

A firm can achieve a higher growth rate without raising external capital if:

Accepted Answer

A)  it plows back a high proportion of its earnings. 
B)  it has a high return on equity (RO
E) . 
C)  it has a low debt-to-asset ratio. 
D)  all of these. 
A)  it plows back a high proportion of its earnings. 
B)  it has a high return on equity (RO
E) . 
C)  it has a low debt-to-asset ratio. 
D)  all of these.

Question 15

Firms that maintain a constant ratio of debt-equity over a variable business cycle may find that:

Accepted Answer

A)  debt has grown too large, too fast. 
B)  it is more difficult to maintain a stable dividend. 
C)  debt covenants always accommodate more debt, but often prevent debt prepayment. 
D)  equity is always less expensive to obtain than debt. 
A)  debt has grown too large, too fast. 
B)  it is more difficult to maintain a stable dividend. 
C)  debt covenants always accommodate more debt, but often prevent debt prepayment. 
D)  equity is always less expensive to obtain than debt.

Question 16

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 17

Which of the following does not provide a "solution" to a projected growth rate in assets that exceeds the sustainable growth rate?

Accepted Answer

A)  Increase the ROE. 
B)  Allow the debt-equity ratio to increase. 
C)  Increase the payout ratio. 
D)  Issue new equity. 
A)  Increase the ROE. 
B)  Allow the debt-equity ratio to increase. 
C)  Increase the payout ratio. 
D)  Issue new equity.

Question 18

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 19

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

Accepted Answer

A) True 
 B)False

Exam 18: Long-Term Financial Planning

A major focus of financial planning is to:

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

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

What is the required asset turnover for a firm with a 12% profit margin,50% equity,and a 40% dividend payout that wishes to grow at 6% without increasing financial leverage?

Under which of the following capital structures will a firm's internal growth rate exceed its sustainable growth rate?

Adaptability is not a desirable feature in financial plans.

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

Why is it important that financial plans incorporate adaptability?

Pro formas are projected or forecasted financial statements.

Financial planning just means formulating the company's response to the most likely events.

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

Financial planning requires accurate and consistent forecasting.

A firm can achieve a higher growth rate without raising external capital if:

Firms that maintain a constant ratio of debt-equity over a variable business cycle may find that:

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:

Which of the following does not provide a "solution" to a projected growth rate in assets that exceeds the sustainable growth rate?

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

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

Goals and Governance of the Corporation

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

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Short-Term Financial Planning

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters