Exam 17: Financial Planning and Forecasting

If a firm wants to maintain its ratios at their existing levels,then if it has a positive sales growth rate of any amount,it will require some amount of external funding.

(True/False)

4.9/5

(82)

Question 21

Which of the following statements is CORRECT?

(Multiple Choice)

4.8/5

(87)

Question 22

A company expects sales to increase during the coming year,and it is using the AFN equation to forecast the additional capital that it must raise.Which of the following conditions would cause the AFN to increase?

(Multiple Choice)

4.9/5

(68)

Question 23

Which of the following is NOT a key element in strategic planning as it is described in the text?

(Multiple Choice)

4.8/5

(87)

Question 24

The term "spontaneously generated funds" generally refers to increases in the cash account that result from growth in sales,assuming the firm is operating with a positive profit margin.

(True/False)

4.9/5

(86)

Question 25

As a firm's sales grow,its current assets also tend to increase.For instance,as sales increase,the firm's inventories generally increase,and purchases of inventories result in more accounts payable.Thus,spontaneously generated funds arise from transactions brought on by sales increases.

(True/False)

4.8/5

(67)

Question 26

Two firms with identical capital intensity ratios are generating the same amount of sales.However,Firm A is operating at full capacity,while Firm B is operating below capacity.If the two firms expect the same growth in sales during the next period,then Firm A is likely to need more additional funds than Firm B,other things held constant.

(True/False)

4.8/5

(67)

Question 27

Last year Emery Industries had $450 million of sales and $225 million of fixed assets,so its Fixed Assets/Sales ratio was 50%.However,its fixed assets were used at only 65% of capacity.If the company had been able to sell off enough of its fixed assets at book value so that it was operating at full capacity,with sales held constant at $450 million,how much cash (in millions)would it have generated?

(Multiple Choice)

4.9/5

(93)

Question 28

Kamath-Meier Corporation's CFO uses this equation,which was developed by regressing inventories on sales over the past 5 years,to forecast inventory requirements: Inventories = $22.0 + 0.125(Sales).The company expects sales of $400 million during the current year,and it expects sales to grow by 30% next year.What is the inventory forecast for next year? All dollars are in millions.

(Multiple Choice)

4.8/5

(70)

Question 29

Which of the following statements is CORRECT?

(Multiple Choice)

4.7/5

(72)

Question 30

The fact that long-term debt and common stock are raised infrequently and in large amounts lessens the need for the firm to forecast those accounts on a continual basis.

(True/False)

4.7/5

(93)

Question 31

Which of the following statements is CORRECT?

(Multiple Choice)

4.7/5

(72)

Question 32

Spontaneously generated funds are generally defined as follows:

(Multiple Choice)

4.9/5

(73)

Question 33

When developing forecasted financial statements there are some inputs that management controls such as the growth rate and operating costs/sales ratio,while other inputs such as the tax rate and interest rate are not under its control.

(True/False)

4.9/5

(75)

Question 34

Last year Jain Technologies had $250 million of sales and $100 million of fixed assets,so its Fixed Assets/Sales ratio was 40%.However,its fixed assets were used at only 75% of capacity.Now the company is developing its financial forecast for the coming year.As part of that process,the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity.What target Fixed Assets/Sales ratio should the company set?

(Multiple Choice)

4.9/5

(79)

Question 35

Which of the following statements is CORRECT?

(Multiple Choice)

4.9/5

(83)

Question 36

Fairchild Garden Supply expects $600 million of sales this year,and it forecasts a 15% increase for next year.The CFO uses this equation to forecast inventory requirements at different levels of sales: Inventories = $30.2 + 0.25(Sales).All dollars are in millions.What is the projected inventory turnover ratio for the coming year?

(Multiple Choice)

4.9/5

(75)

Question 37

Which of the following is NOT one of the steps taken in the financial planning process?

(Multiple Choice)

5.0/5

(96)

Question 38

If a firm's capital intensity ratio (A₀*/S₀)decreases as sales increase,use of the AFN formula is likely to understate the amount of additional funds required,other things held constant.

(True/False)

4.8/5

(88)

Question 39

Showing 21 - 39 of 39

Exam 17: Financial Planning and Forecasting

If a firm wants to maintain its ratios at their existing levels,then if it has a positive sales growth rate of any amount,it will require some amount of external funding.

Which of the following statements is CORRECT?

A company expects sales to increase during the coming year,and it is using the AFN equation to forecast the additional capital that it must raise.Which of the following conditions would cause the AFN to increase?

Which of the following is NOT a key element in strategic planning as it is described in the text?

The term "spontaneously generated funds" generally refers to increases in the cash account that result from growth in sales,assuming the firm is operating with a positive profit margin.

As a firm's sales grow,its current assets also tend to increase.For instance,as sales increase,the firm's inventories generally increase,and purchases of inventories result in more accounts payable.Thus,spontaneously generated funds arise from transactions brought on by sales increases.

Which of the following statements is CORRECT?

The fact that long-term debt and common stock are raised infrequently and in large amounts lessens the need for the firm to forecast those accounts on a continual basis.

Which of the following statements is CORRECT?

Spontaneously generated funds are generally defined as follows:

When developing forecasted financial statements there are some inputs that management controls such as the growth rate and operating costs/sales ratio,while other inputs such as the tax rate and interest rate are not under its control.

Which of the following statements is CORRECT?

Which of the following is NOT one of the steps taken in the financial planning process?

If a firm's capital intensity ratio (A0*/S0)decreases as sales increase,use of the AFN formula is likely to understate the amount of additional funds required,other things held constant.

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements, cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, leasing, warrants, and Convertibles

Mergers and Acquisitions

Continuous Compounding and Discounting

Zero Coupon Bonds

Bankruptcy and Reorganization

Calculating Beta Coefficients

Using the Capm to Estimate the Risk-Adjusted Cost of Capital

Techniques for Measuring Beta Risk

Degree of Leverage

Filters

If a firm's capital intensity ratio (A₀*/S₀)decreases as sales increase,use of the AFN formula is likely to understate the amount of additional funds required,other things held constant.