Question 1

Financial planning focuses on:

Accepted Answer

A)   The individual components of the ﬁnancial policy.
B)   The major elements of the ﬁnancial and investment policies.
C)   Anticipated changes only in the short-run.
D)   The income statement but not the balance sheet.
E)   Capital structure and dividend policy only.F) A) and D)
G) C) and D)

Question 2

Calculate retention ratio given the following information: EBIT $100,000; tax rate 30%; dividends paid $24,500.

Accepted Answer

A)   35%
B)   65%
C)   40%
D)   50%
E)   70%F) D) and E)
G) B) and E)

Question 3

All else equal, the lower the forecast growth the larger the level of external ﬁnancing needed.

Accepted Answer

A) True 
 B)False

Question 4

Calculate the sustainable growth rate given the following information: Shareholders' equity $650,000; net income $80,000; dividends paid $18,000.

Accepted Answer

A)   14.54%
B)   13.22%
C)   12.36%
D)   11.45%
E)   10.54%F) A) and E)
G) A) and C)

Question 5

Sales can often increase without increasing which one of the following?

Accepted Answer

A)   Accounts receivable.
B)   Cost of goods sold.
C)   Manufacturing labor.
D)   Fixed assets.
E)   Inventory.F) All of the above
G) C) and E)

Question 6

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the
term debt capacity. Provide a deﬁnition that conveys what the term means from a ﬁnance
perspective.

Accepted Answer

The term can best be...

Question 7

Aggregation refers to the process by which a ﬁrm ﬁrst projects its aggregate investment
requirement, then it breaks that total up and allocates it to the investment proposals of the ﬁrm's
smaller units.

Accepted Answer

A) True 
 B)False

Question 8

Calculate retention ratio given the following information: net income = $15,000; cash dividends paid = $5,250.

Accepted Answer

A)   65%
B)   35%
C)   70%
D)   30%
E)   50%F) B) and D)
G) A) and C)

Question 9

Calculate sales given the following data. Total ﬁxed assets $400,000; long-term liabilities $155,000; total liabilities $280,000; total shareholders' equity $320,000; net working capital turnover 20.

Accepted Answer

A)   $1,500,000
B)   $1,700,000
C)   $1,900,000
D)   $2,100,000
E)   $2,250,000F) None of the above
G) C) and D)

Question 10

The sustainable growth rate is dependent on proﬁt margin.

Accepted Answer

A) True 
 B)False

Question 11

The sustainable growth rate excludes additional equity ﬁnancing.

Accepted Answer

A) True 
 B)False

Question 12

Calculate the sustainable growth rate given the following information: return on equity = 20%; payout ratio = 40%.

Accepted Answer

A)   15.64%
B)   14.64%
C)   13.64%
D)   12.64%
E)   11.64%F) D) and E)
G) B) and C)

Question 13

Long-range ﬁnancial planning for a ﬁrm usually includes an analysis of the next:

Accepted Answer

A)   6 to 12 months.
B)   1 to 2 years.
C)   2 to 5 years.
D)   5 to 10 years.
E)   10 to 20 years.F) B) and E)
G) B) and D)

Question 14

The internal growth rate of a ﬁrm is best described as:

Accepted Answer

A)   The minimum growth rate achievable if the ﬁrm does not pay out any cash dividends.
B)   The minimum growth rate achievable if the ﬁrm maintains a constant equity multiplier.
C)   The maximum growth rate achievable without external ﬁnancing of any kind.
D)   The maximum growth rate achievable without using any external equity ﬁnancing, while maintaining a constant debt-equity ratio.
E)   The maximum growth rate achievable without any limits on the amount of debt ﬁnancing used.F) All of the above
G) None of the above

Question 15

Given the following information: sales = $450; costs = $400; tax rate = 34%. Assuming costs run at a constant percentage of sales, if sales rise by 10% next year, what will net income be?

Accepted Answer

A)   $3.30
B)   $33.00
C)   $36.30
D)   $146.00
E)   $197.22F) C) and D)
G) A) and B)

Question 16

Calculate depreciation expense given the following information. Interest expense $2,000; times interest earned 5; cash coverage ratio 5.5.

Accepted Answer

A)   $1,000
B)   $1,200
C)   $1,400
D)   $1,600
E)   $1,800F) A) and B)
G) B) and D)

Question 17

The ﬁnancial planning method in which accounts are varied depending on a ﬁrm's predicted sales level is called the:

Accepted Answer

A)   Percentage of sales approach.
B)   Sales dilution approach.
C)   Sales reconciliation approach.
D)   Common-size approach.
E)   Time-trend approach.F) None of the above
G) D) and E)

Question 18

A ﬁrm is currently operating at full capacity. Net working capital, costs, and all assets vary directly with sales. The ﬁrm does not wish to obtain any additional equity ﬁnancing. The dividend payout
Ratio is constant at 40 percent. When the ﬁrm compiles a pro forma statement, the plug variable is
Most likely going to be:

Accepted Answer

A)   Accounts payable.
B)   Long-term debt.
C)   Fixed assets.
D)   Retained earnings.
E)   Common stock.F) A) and D)
G) All of the above

Question 19

Determining the amount of liquidity needed by a ﬁrm is referred to as the:

Accepted Answer

A)   Capital budgeting decision.
B)   Capital structure policy.
C)   Working capital decision.
D)   Aggregation planning decision.
E)   Financing policy decision.F) B) and E)
G) A) and E)

Question 20

Assuming a constant proﬁt margin, what will Stansﬁeld Corporation's net income be if sales increase by 10% ($ in millions) ?

Accepted Answer

A)   $33.0 million
B)   $34.5 million
C)   $36.3 million
D)   $39.6 millionE) A) and C)
F) C) and D)

Exam 4: Long-Term Financial Planning and Growth

Long-range ﬁnancial planning for a ﬁrm usually includes an analysis of the next:

Correct Answer
verified

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term debt capacity. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Correct Answer
verified
The term can best be...
View Answer

The ﬁnancial planning method in which accounts are varied depending on a ﬁrm's predicted sales level is called the:

Correct Answer
verified

Assuming a constant proﬁt margin, what will Stansﬁeld Corporation's net income be if sales increase by 10% ($ in millions) ?

Correct Answer
verified

Determining the amount of liquidity needed by a ﬁrm is referred to as the:

Correct Answer
verified

Calculate sales given the following data. Total ﬁxed assets $400,000; long-term liabilities $155,000; total liabilities $280,000; total shareholders' equity $320,000; net working capital turnover 20.

Correct Answer
verified

Aggregation refers to the process by which a ﬁrm ﬁrst projects its aggregate investment requirement, then it breaks that total up and allocates it to the investment proposals of the ﬁrm's smaller units.

Correct Answer
verified

The sustainable growth rate is dependent on proﬁt margin.

Correct Answer
verified

Calculate retention ratio given the following information: net income = $15,000; cash dividends paid = $5,250.

Correct Answer
verified

Calculate the sustainable growth rate given the following information: return on equity = 20%; payout ratio = 40%.

Correct Answer
verified

Given the following information: sales = $450; costs = $400; tax rate = 34%. Assuming costs run at a constant percentage of sales, if sales rise by 10% next year, what will net income be?

Correct Answer
verified

Correct Answer
verified

Sales can often increase without increasing which one of the following?

Correct Answer
verified

Financial planning focuses on:

Correct Answer
verified

The sustainable growth rate excludes additional equity ﬁnancing.

Correct Answer
verified

All else equal, the lower the forecast growth the larger the level of external ﬁnancing needed.

Correct Answer
verified

Calculate depreciation expense given the following information. Interest expense $2,000; times interest earned 5; cash coverage ratio 5.5.

Correct Answer
verified

The internal growth rate of a ﬁrm is best described as:

Correct Answer
verified

Calculate retention ratio given the following information: EBIT $100,000; tax rate 30%; dividends paid $24,500.

Correct Answer
verified

Calculate the sustainable growth rate given the following information: Shareholders' equity $650,000; net income $80,000; dividends paid $18,000.

Correct Answer
verified

Exam 4: Long-Term Financial Planning and Growth

Long-range ﬁnancial planning for a ﬁrm usually includes an analysis of the next:

Correct AnswerverifiedShow Answer

Consider that you are a ﬁnance manager, and one of your junior staff wanted an explanation of the term debt capacity. Provide a deﬁnition that conveys what the term means from a ﬁnance perspective.

Correct AnswerverifiedThe term can best be...View AnswerShow Answer

The ﬁnancial planning method in which accounts are varied depending on a ﬁrm's predicted sales level is called the:

Correct AnswerverifiedShow Answer

Assuming a constant proﬁt margin, what will Stansﬁeld Corporation's net income be if sales increase by 10% ($ in millions) ?

Correct AnswerverifiedShow Answer

Determining the amount of liquidity needed by a ﬁrm is referred to as the:

Correct AnswerverifiedShow Answer

Calculate sales given the following data. Total ﬁxed assets $400,000; long-term liabilities $155,000; total liabilities $280,000; total shareholders' equity $320,000; net working capital turnover 20.

Correct AnswerverifiedShow Answer

Aggregation refers to the process by which a ﬁrm ﬁrst projects its aggregate investment requirement, then it breaks that total up and allocates it to the investment proposals of the ﬁrm's smaller units.

Correct AnswerverifiedShow Answer

The sustainable growth rate is dependent on proﬁt margin.

Correct AnswerverifiedShow Answer

Calculate retention ratio given the following information: net income = $15,000; cash dividends paid = $5,250.

Correct AnswerverifiedShow Answer

Calculate the sustainable growth rate given the following information: return on equity = 20%; payout ratio = 40%.

Correct AnswerverifiedShow Answer

Given the following information: sales = $450; costs = $400; tax rate = 34%. Assuming costs run at a constant percentage of sales, if sales rise by 10% next year, what will net income be?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Sales can often increase without increasing which one of the following?

Correct AnswerverifiedShow Answer

Financial planning focuses on:

Correct AnswerverifiedShow Answer

The sustainable growth rate excludes additional equity ﬁnancing.

Correct AnswerverifiedShow Answer

All else equal, the lower the forecast growth the larger the level of external ﬁnancing needed.

Correct AnswerverifiedShow Answer

Calculate depreciation expense given the following information. Interest expense $2,000; times interest earned 5; cash coverage ratio 5.5.

Correct AnswerverifiedShow Answer

The internal growth rate of a ﬁrm is best described as:

Correct AnswerverifiedShow Answer

Calculate retention ratio given the following information: EBIT $100,000; tax rate 30%; dividends paid $24,500.

Correct AnswerverifiedShow Answer

Calculate the sustainable growth rate given the following information: Shareholders' equity $650,000; net income $80,000; dividends paid $18,000.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified
The term can best be...
View Answer

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