Question 1

A complete balance sheet and income statement mechanically imply a working statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 2

The sustainable sales growth rate is equal to ROA times the retention ratio.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is incorrect?

Accepted Answer

A)  forecasting sales is the first step in creating projected financial statements 
B)  financial forecasting tends to be more accurate for mature ventures than for early-stage ventures 
C)  forecasting is relatively unimportant for early-stage ventures with little historical financial data 
D)  a and b 
E)  a and c 
A)  forecasting sales is the first step in creating projected financial statements 
B)  financial forecasting tends to be more accurate for mature ventures than for early-stage ventures 
C)  forecasting is relatively unimportant for early-stage ventures with little historical financial data 
D)  a and b 
E)  a and c

Question 4

If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 4.0 times, and a dividend payout ratio of 60%, the sustainable growth rate would be:

Accepted Answer

A)  10% 
B)  16% 
C)  20% 
D)  24% 
E)  40% 
A)  10% 
B)  16% 
C)  20% 
D)  24% 
E)  40%

Question 5

Which of the following is a forecasting method used to project financial statements?

Accepted Answer

A)  percent-of-sales method 
B)  percent-of-expenses method 
C)  GNP-ratio method 
D)  a and b 
E)  a, b, and c 
A)  percent-of-sales method 
B)  percent-of-expenses method 
C)  GNP-ratio method 
D)  a and b 
E)  a, b, and c

Question 6

Determine a firm's "financial policy" multiplier based on the following information: sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.

Accepted Answer

A)  1.00 
B)  1.25 
C)  1.50 
D)  1.75 
E)  2.00 
A)  1.00 
B)  1.25 
C)  1.50 
D)  1.75 
E)  2.00

Question 7

If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 3.5 times, and a retention rate = 50%, the sustainable growth rate would be:

Accepted Answer

A)  10% 
B)  17.5% 
C)  35% 
D)  40% 
E)  20.5% 
A)  10% 
B)  17.5% 
C)  35% 
D)  40% 
E)  20.5%

Question 8

Increases in accounts payable and notes payable are examples of spontaneously generated funds.

Accepted Answer

A) True 
 B)False

Question 9

The weighted average of a set of possible outcomes or scenarios is known as expected values.

Accepted Answer

A) True 
 B)False

Question 10

The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:

Accepted Answer

A)  spontaneously generated funds 
B)  additional funds needed 
C)  addition in retained earnings 
D)  financial capital needed 
A)  spontaneously generated funds 
B)  additional funds needed 
C)  addition in retained earnings 
D)  financial capital needed

Question 11

Long-term financial planning begins with a forecast of annual working capital needs.

Accepted Answer

A) True 
 B)False

Question 12

"Financial capital needed" FCN) is the amount of funds needed to acquire assets necessary to support a firm's sales growth.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not part of the financial forecasting process used to project financial statements?

Accepted Answer

A)  forecast sales 
B)  forecast tax rates 
C)  project the income statement 
D)  project the balance sheete project the statement of cash flows 
A)  forecast sales 
B)  forecast tax rates 
C)  project the income statement 
D)  project the balance sheete project the statement of cash flows

Question 14

Use the following information to estimate a venture's sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.

Accepted Answer

A)  50% 
B)  25% 
C)  20% 
D)  10% 
E)  5% 
A)  50% 
B)  25% 
C)  20% 
D)  10% 
E)  5%

Question 15

Which one of the following ratios is not part of the "standard" return on equity ROE) model?

Accepted Answer

A)  net profit margin 
B)  asset turnover 
C)  equity multiplier 
D)  retention rate 
A)  net profit margin 
B)  asset turnover 
C)  equity multiplier 
D)  retention rate

Question 16

"First-round financing" usually occurs during a venture's rapid-growth life cycle stage.

Accepted Answer

A) True 
 B)False

Question 17

A venture's common equity was $50,000 at the end of last year. If the venture's common equity at the end of this year was $60,000, what was its sustainable sales growth rate?

Accepted Answer

A)  5% 
B)  10% 
C)  15% 
D)  20% 
E)  25% 
A)  5% 
B)  10% 
C)  15% 
D)  20% 
E)  25%

Question 18

A firm has net income of $320,000 on sales of $3,200,000. Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000. What is the sustainable growth rate?

Accepted Answer

A)  5% 
B)  15% 
C)  6.25% 
D)  4.69% 
E)  none of the above 
A)  5% 
B)  15% 
C)  6.25% 
D)  4.69% 
E)  none of the above

Question 19

If beginning of period common equity is $200,000 and end of period common equity is $300,000, the sustainable growth rate is:

Accepted Answer

A)  33% 
B)  40% 
C)  50% 
D)  67% 
E)  75% 
A)  33% 
B)  40% 
C)  50% 
D)  67% 
E)  75%

Question 20

In a typical venture's life cycle, the rapid-growth stage involves creating and building value, obtaining additional financing, and examining exit opportunities.

Accepted Answer

A) True 
 B)False

A complete balance sheet and income statement mechanically imply a working statement of cash flows.

The sustainable sales growth rate is equal to ROA times the retention ratio.

Which of the following statements is incorrect?

If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 4.0 times, and a dividend payout ratio of 60%, the sustainable growth rate would be:

Which of the following is a forecasting method used to project financial statements?

Determine a firm's "financial policy" multiplier based on the following information: sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.

If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 3.5 times, and a retention rate = 50%, the sustainable growth rate would be:

Increases in accounts payable and notes payable are examples of spontaneously generated funds.

The weighted average of a set of possible outcomes or scenarios is known as expected values.

The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:

Long-term financial planning begins with a forecast of annual working capital needs.

"Financial capital needed" FCN) is the amount of funds needed to acquire assets necessary to support a firm's sales growth.

Which of the following is not part of the financial forecasting process used to project financial statements?

Use the following information to estimate a venture's sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.

Which one of the following ratios is not part of the "standard" return on equity ROE) model?

"First-round financing" usually occurs during a venture's rapid-growth life cycle stage.

A venture's common equity was $50,000 at the end of last year. If the venture's common equity at the end of this year was $60,000, what was its sustainable sales growth rate?

A firm has net income of $320,000 on sales of $3,200,000. Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000. What is the sustainable growth rate?

If beginning of period common equity is $200,000 and end of period common equity is $300,000, the sustainable growth rate is:

In a typical venture's life cycle, the rapid-growth stage involves creating and building value, obtaining additional financing, and examining exit opportunities.

Introduction to Finance for Entrepreneurs

Developing the Business Idea

Organizing and Financing a New Venture

Preparing and Using Financial Statements

Evaluating Operating and Financial Performance

Managing Cash Flow

Types and Costs of Financial Capital

Securities Law Considerations When Obtaining Venture Financing

Valuing Early-Stage Ventures

Venture Capital Valuation Methods

Professional Venture Capital

Other Financing Alternatives

Security Structures and Determining Enterprise Values

Harvesting the Business Venture Investment

Financially Troubled Ventures: Turnaround Opportunities

Filters

Exam 9: Projecting Financial Statements

A complete balance sheet and income statement mechanically imply a working statement of cash flows.

The sustainable sales growth rate is equal to ROA times the retention ratio.

Which of the following statements is incorrect?

If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 4.0 times, and a dividend payout ratio of 60%, the sustainable growth rate would be:

Which of the following is a forecasting method used to project financial statements?

Determine a firm's "financial policy" multiplier based on the following information: sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.

If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 3.5 times, and a retention rate = 50%, the sustainable growth rate would be:

Increases in accounts payable and notes payable are examples of spontaneously generated funds.

The weighted average of a set of possible outcomes or scenarios is known as expected values.

The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:

Long-term financial planning begins with a forecast of annual working capital needs.

"Financial capital needed" FCN) is the amount of funds needed to acquire assets necessary to support a firm's sales growth.

Which of the following is not part of the financial forecasting process used to project financial statements?

Use the following information to estimate a venture's sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.

Which one of the following ratios is not part of the "standard" return on equity ROE) model?

"First-round financing" usually occurs during a venture's rapid-growth life cycle stage.

A venture's common equity was $50,000 at the end of last year. If the venture's common equity at the end of this year was $60,000, what was its sustainable sales growth rate?

A firm has net income of $320,000 on sales of $3,200,000. Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000. What is the sustainable growth rate?

If beginning of period common equity is $200,000 and end of period common equity is $300,000, the sustainable growth rate is:

In a typical venture's life cycle, the rapid-growth stage involves creating and building value, obtaining additional financing, and examining exit opportunities.

Introduction to Finance for Entrepreneurs

Developing the Business Idea

Organizing and Financing a New Venture

Preparing and Using Financial Statements

Evaluating Operating and Financial Performance

Managing Cash Flow

Types and Costs of Financial Capital

Securities Law Considerations When Obtaining Venture Financing

Valuing Early-Stage Ventures

Venture Capital Valuation Methods

Professional Venture Capital

Other Financing Alternatives

Security Structures and Determining Enterprise Values

Harvesting the Business Venture Investment

Financially Troubled Ventures: Turnaround Opportunities

Filters