Exam 9: Projecting Financial Statements

A venture's common equity account increased by $100,000 the past year and ended the year at $500,000. What was its sustainable sales growth rate?

"Public or seasoned financing" typically occurs during the survival stage of a venture's life cycle.

If a venture has a return on assets ROA) = 12%, an equity multiplier based on beginning equity = 3.0 times, and a sustainable growth rate of 18%, the retention rate would be:

"Additional funds needed" AFN) is the gap remaining between the financial capital needed and that funded by spontaneously generated funds and retained earnings.

"Internally generated funds" is the cash produced from operating a firm over a specified time period.

Determine a venture's sustainable growth rate based on the following information: sales = $1,000,000; net income = $100,000; common equity at the beginning of the year = $500,000; and the retention rate = 50%.

Lola is in the process of forecasting the sales growth rate for an early-stage venture specializing in the production of durable running shoes. Lola predicts a .2 probability of an 80% growth in sales, a .3 probability of a 60% growth in sales, a .4 probability of a 40% growth in sales, and a .1 probability of a 10% decrease in sales. What is the expected sales growth rate of the venture?

The constant ratio forecasting method makes projections based on the assumption that certain costs and some balance sheet items are best expressed as a percentage of sales.

When using the beginning of period equity base, the sustainable sales growth rate is equal to ROE times the retention ratio.

A firm projects net income to be $500,000, intends to pay out $125,000 in dividends, and had $2 million of equity at the beginning of the year. The firm's sustainable growth rate is:

Internally generated funds which are available for distribution to owners of for reinvestment back into the business to support future growth can be characterized by which of the following?

Sales forecasting accuracy is usually highest during a venture's startup stage in its life cycle.

Increases in accounts receivable and accounts payable that accompany sales increases are called "spontaneously generated funds".

A sales growth rate based on the retention of profits is referred to as the:

Which one of the following life cycle stages would generally be associated with the second lowest sales forecasting accuracy?

A customer-driven or "bottom-up" approach to forecasting sales is used primarily to forecast industry sales growth rates.

Determine a firm's "return on assets" percentage based on the following information: sustainable growth rate = 20%; total assets $500,000; beginning of year common equity $200,000; and dividend payout percentage = 60%.

An increase in accounts receivable will require additional financing unless the increase is offset by an equal decrease in another asset account.

The increase in accounts payables and accruals that occur with a sales increase is called:

Determine a venture's sustainable growth rate based on the following information: sales = $1,000,000; net income = $150,000; common equity at the end of last year = $520,000; and the dividend payout percentage = 20%.