Question 1

Which of the following statements is correct?

Accepted Answer

A) An auto manufacturer is less capital intensive than a bakery. 
B) An accounting firm is more capital intensive than a railroad. 
C) An oil refinery is more capital intensive than Starbucks. 
D) None of these are correct. 
A) An auto manufacturer is less capital intensive than a bakery. 
B) An accounting firm is more capital intensive than a railroad. 
C) An oil refinery is more capital intensive than Starbucks. 
D) None of these are correct.

Question 2

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach?

Accepted Answer

A) $10,000,000 
B) $10,550,000 
C) $10,840,000 
D) $12,000,000 
A) $10,000,000 
B) $10,550,000 
C) $10,840,000 
D) $12,000,000

Question 3

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach?

Accepted Answer

A) $1,000,000 
B) $1,740,000 
C) $1,925,000 
D) $2,200,000 
A) $1,000,000 
B) $1,740,000 
C) $1,925,000 
D) $2,200,000

Question 4

What is computed by dividing the amount of assets tied directly to sales (A*)by the amount of current sales (S0)?

Accepted Answer

A) Capital intensity ratio 
B) Current ratio 
C) Quick ratio 
D) Spontaneous assets 
A) Capital intensity ratio 
B) Current ratio 
C) Quick ratio 
D) Spontaneous assets

Question 5

Goldilochs Inc.reported sales of $8 million and net income of $1.5 million.The firm has $10.5 million in total assets and $1 million in current liabilities.The firm currently pays out 75 percent of its net income to shareholders.Assume that all assets and current liabilities are expected to grow with sales.If Goldilochs does not want to rely on any external sources of funds,what is the most sales can grow (in percent)?

Accepted Answer

A) 3.18 percent 
B) 2.99 percent 
C) 4.11 percent 
D) 3.64 percent 
A) 3.18 percent 
B) 2.99 percent 
C) 4.11 percent 
D) 3.64 percent

Question 6

Goldilochs Inc.reported sales of $8 million and net income of $2 million.The firm has a total asset turnover of 1.2.The firm's chief financial officer is projecting a $6 million increase in sales and that spontaneous liabilities will increase by $1 million automatically.The firm currently pays out 50 percent of its net income to shareholders.Assuming that all assets and current liabilities are expected to grow with sales,how much in additional funds will Goldilochs need from external sources to fund the expected growth?

Accepted Answer

A) $1,250,000 
B) $1,750,000 
C) $2,500,000 
D) $2,250,000 
A) $1,250,000 
B) $1,750,000 
C) $2,500,000 
D) $2,250,000

Question 7

Suppose that Team Industries,Inc.currently has the balance sheet shown as follows,and that sales for the year just ended were $3 million.The firm also has a profit margin of 20 percent,a retention ratio of 30 percent,and expects sales of $6 million next year.If all assets and current liabilities are expected to increase with sales,what amount of additional funds will the company need from external sources?

Accepted Answer

A) $2,140,000 
B) $2,320,000 
C) $2,500,000 
D) $4,500,000 
A) $2,140,000 
B) $2,320,000 
C) $2,500,000 
D) $4,500,000

Question 8

Contrast the difference between first order effects and higher order effects when forecasting financial statements.

Accepted Answer

First order effects are defined as the i

Question 9

Goldilochs Inc.reported sales of $8 million and net income of $1.5 million.The firm has $12 million in total assets and $500,000 in current liabilities.The firm currently pays out 25 percent of its net income to shareholders.Assume that all assets and current liabilities are expected to grow with sales.If Goldilochs does not want to rely on any external sources of funds,what is the most sales can grow (in dollars)?

Accepted Answer

A) $887,900 
B) $867,500 
C) $928,800 
D) $964,100 
A) $887,900 
B) $867,500 
C) $928,800 
D) $964,100

Question 10

The additional funds needed by the firm can be calculated by assuming which of the following?

Accepted Answer

A) The firm's additional sales will grow proportionately as assets are purchased. 
B) The firm's additional capital needed will grow proportionately with projected changes in sales. 
C) The firm's balance sheet will grow proportionately with projected changes in sales. 
D) The firm's additional sales will grow proportionately as capital is brought on to the balance sheet. 
A) The firm's additional sales will grow proportionately as assets are purchased. 
B) The firm's additional capital needed will grow proportionately with projected changes in sales. 
C) The firm's balance sheet will grow proportionately with projected changes in sales. 
D) The firm's additional sales will grow proportionately as capital is brought on to the balance sheet.

Question 11

Suppose that the 2013 actual and 2014 projected financial statements for Counter Corp.are initially as shown in the following tables.In these tables,sales are projected to rise 35 percent in the coming year,and the components of the income statement and balance sheet that are expected to increase at the same 35 percent rate as sales are indicated with an italics font.Assuming that Counter Corp.wants to cover the AFN with 60 percent equity,25 percent long-term debt,and the remainder from notes payable,what amount of additional funds will they need to raise if debt carries an 8 percent interest rate?

Accepted Answer

A) $217,260 equity; $90,525 long-term debt; $54,315 notes payable 
B) $217,260 equity; $90,525 notes payable; $54,315 long-term debt 
C) $54,315 equity; $90,525 long-term debt; $217,260 notes payable 
D) None of these answers is correct. 
A) $217,260 equity; $90,525 long-term debt; $54,315 notes payable 
B) $217,260 equity; $90,525 notes payable; $54,315 long-term debt 
C) $54,315 equity; $90,525 long-term debt; $217,260 notes payable 
D) None of these answers is correct.

Question 12

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the naїve approach?

Accepted Answer

A) $1,000,000 
B) $1,740,000 
C) $1,925,000 
D) $2,200,000 
A) $1,000,000 
B) $1,740,000 
C) $1,925,000 
D) $2,200,000

Question 13

Suppose that the 2013 actual and 2014 projected financial statements for Camera Corp.are initially as shown in the following tables.In these tables,sales are projected to rise 40 percent in the coming year,and the components of the income statement and balance sheet that are expected to increase at the same 40 percent rate as sales are indicated with an italics font.Assuming that Camera Corp.wants to cover the AFN with 40 percent equity,30 percent long-term debt,and the remainder from notes payable,what amount of additional funds will they need to raise if debt carries a 7 percent interest rate?

Accepted Answer

A) $81,200 equity; $60,900 long-term debt; $60,900 notes payable 
B) $60,900 equity; $81,200 notes payable; $60,900 long-term debt 
C) $203,000 equity; $0 long-term debt; $0 notes payable 
D) None of the answers is correct 
A) $81,200 equity; $60,900 long-term debt; $60,900 notes payable 
B) $60,900 equity; $81,200 notes payable; $60,900 long-term debt 
C) $203,000 equity; $0 long-term debt; $0 notes payable 
D) None of the answers is correct

Question 14

Silly Putty Inc.has had sales of $12 million,$17 million,and $16 million for each of the last three years.What would be the MAPE if the actual sales were $15 million using the naїve approach?

Accepted Answer

A) 6.71 percent 
B) 5.73 percent 
C) -8.14 percent 
D) -6.67 percent 
A) 6.71 percent 
B) 5.73 percent 
C) -8.14 percent 
D) -6.67 percent

Question 15

Suppose that TV Industries,Inc.currently has the balance sheet shown as follows,and that sales for the year just ended were $5 million.The firm also has a profit margin of 15 percent,a retention ratio of 25 percent,and expects sales of $5.5 million next year.If all assets and current liabilities are expected to increase with sales,what amount of additional funds will the company need from external sources to fund the expected growth?

Accepted Answer

A) $0 
B) $6,250 
C) $206,250 
D) $12,500 
A) $0 
B) $6,250 
C) $206,250 
D) $12,500

Question 16

Suppose that BBM Industries,Inc.currently has the balance sheet shown as follows,and that sales for the year just ended were $2 million.The firm also has a profit margin of 5 percent,a retention ratio of 50 percent,and expects sales of $2.5 million next year.If all assets and current liabilities are expected to increase with sales,what amount of additional funds will the company need from external sources to fund the expected growth?

Accepted Answer

A) $0 
B) $62,500 
C) $437,500 
D) $500,000 
A) $0 
B) $62,500 
C) $437,500 
D) $500,000

Question 17

How is the capital intensity ratio calculated? How is it used in the AFN formula?

Accepted Answer

The capital intensity ratio is calculate

Question 18

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach if it was determined that years 2008 and 2009 were "stale"?

Accepted Answer

A) $1,900,000 
B) $2,500,000 
C) $2,833,333 
D) $3,000,000 
A) $1,900,000 
B) $2,500,000 
C) $2,833,333 
D) $3,000,000

Question 19

Articulate the rationale of the additional funds needed approach to estimating the need for a firm to seek external financing.

Accepted Answer

The additional funds needed by the firm

Question 20

Suppose a firm was planning to greatly reduce its raw materials inventory next year by introducing just-in-time inventory control procedures.Assuming no other changes to the firm's operations,what would this do to AFN?

Accepted Answer

A) It would not change the AFN. 
B) The AFN would decrease. 
C) The AFN would increase. 
D) It cannot be determined without knowing the impact on the profit margin. 
A) It would not change the AFN. 
B) The AFN would decrease. 
C) The AFN would increase. 
D) It cannot be determined without knowing the impact on the profit margin.

Which of the following statements is correct?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach?

What is computed by dividing the amount of assets tied directly to sales (A*)by the amount of current sales (S₀)?

Contrast the difference between first order effects and higher order effects when forecasting financial statements.

The additional funds needed by the firm can be calculated by assuming which of the following?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the naїve approach?

Silly Putty Inc.has had sales of $12 million,$17 million,and $16 million for each of the last three years.What would be the MAPE if the actual sales were $15 million using the naїve approach?

How is the capital intensity ratio calculated? How is it used in the AFN formula?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach if it was determined that years 2008 and 2009 were "stale"?

Articulate the rationale of the additional funds needed approach to estimating the need for a firm to seek external financing.

Suppose a firm was planning to greatly reduce its raw materials inventory next year by introducing just-in-time inventory control procedures.Assuming no other changes to the firm's operations,what would this do to AFN?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 15: Financial Planning and Forecasting

Which of the following statements is correct?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach?

What is computed by dividing the amount of assets tied directly to sales (A*)by the amount of current sales (S0)?

Contrast the difference between first order effects and higher order effects when forecasting financial statements.

The additional funds needed by the firm can be calculated by assuming which of the following?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the naїve approach?

Silly Putty Inc.has had sales of $12 million,$17 million,and $16 million for each of the last three years.What would be the MAPE if the actual sales were $15 million using the naїve approach?

How is the capital intensity ratio calculated? How is it used in the AFN formula?

Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach if it was determined that years 2008 and 2009 were "stale"?

Articulate the rationale of the additional funds needed approach to estimating the need for a firm to seek external financing.

Suppose a firm was planning to greatly reduce its raw materials inventory next year by introducing just-in-time inventory control procedures.Assuming no other changes to the firm's operations,what would this do to AFN?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

What is computed by dividing the amount of assets tied directly to sales (A*)by the amount of current sales (S₀)?