Exam 4: Long-Term Financial Planning and Growth

Monika's Dinor is operating at 94 percent of its fixed asset capacity and has current sales of $611,000.How much can the firm grow before any new fixed assets are needed?

A firm wishes to maintain an internal growth rate of 11 percent and a dividend payout ratio of 24 percent.The current profit margin is 7 percent and the firm uses no external financing sources.What must the total asset turnover rate be?

Country Comfort,Inc.had equity of $150,000 at the beginning of the year.At the end of the year,the company had total assets of $195,000.During the year,the company sold no new equity.Net income for the year was $63,000 and dividends were $44,640.What is the sustainable growth rate?

A Procrustes approach to financial planning is based on:

You are comparing the current income statement of a firm to the pro forma income statement for next year.The pro forma is based on a four percent increase in sales.The firm is currently operating at 85 percent of capacity.Net working capital and all costs vary directly with sales.The tax rate and the dividend payout ratio are fixed.Given this information,which one of the following statements must be true?

Which of the following questions are appropriate to address during the financial planning process? I.Should the firm merge with a competitor? II.Should additional shares of stock be sold? III.Should a particular division be sold? IV.Should a new product be introduced?

Phil is working on a financial plan for the next three years.This time period is referred to as which one of the following?

Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any additional equity financing.The firm maintains a constant debt-equity ratio of .0.55,a total asset turnover ratio of 1.30,and a profit margin of 9.0 percent.What must the dividend payout ratio be?

The sustainable growth rate of a firm is best described as the:

Which one of the following policies most directly affects the projection of the retained earnings balance to be used on a pro forma statement?

Martin Aerospace is currently operating at full capacity based on its current level of assets.Sales are expected to increase by 4.5 percent next year,which is the firm's internal rate of growth.Net working capital and operating costs are expected to increase directly with sales.The interest expense will remain constant at its current level.The tax rate and the dividend payout ratio will be held constant.Current and projected net income is positive.Which one of the following statements is correct regarding the pro forma statement for next year?

The Parodies Corp.has a 22 percent return on equity and a 23 percent payout ratio.What is its sustainable growth rate?

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels.Given this,you can safely assume that the firm:

The most recent financial statements for 7 Seas,Inc.are shown here: Assets,costs,and current liabilities are proportional to sales.Long-term debt and equity are not.The company maintains a constant 50 percent dividend payout ratio.Like every other firm in its industry,next year's sales are projected to increase by exactly 16 percent.What is the external financing need?

Smith & Daughters is getting ready to compile pro forma statements for the next few years.How can the managers establish a reasonable range of growth rates that they should consider during this planning process?

Which of the following can affect a firm's sustainable rate of growth? I.capital intensity ratio II.profit margin III.dividend policy IV.debt-equity ratio

Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?

Fixed Appliance Co.wishes to maintain a growth rate of 8 percent a year,a constant debt-equity ratio of 0.42,and a dividend payout ratio of 50 percent.The ratio of total assets to sales is constant at 1.3.What profit margin must the firm achieve?

Which one of the following terms is defined as dividends paid expressed as a percentage of net income?

When utilizing the percentage of sales approach,managers: I.estimate company sales based on a desired level of net income and the current profit margin. II.consider only those assets that vary directly with sales. III.consider the current production capacity level. IV.can project both net income and net cash flows.