Exam 4: Financial Planning

Which of the following would decrease the sustainable growth rate if all other variables are held constant?

The financial plan is essentially a part of a broader activity known as business planning.

You're the treasurer of Ipswitch Inc. The president has just had the staff produce a top-down plan that shows great improvements on every issue many of which you seriously doubt will be achieved. The plan will be shared with securities analysts from Wall Street shortly. You're having a private meeting with the bank's loan officer to plan next year's borrowing needs. You should:

Which of the following is incorrect about the financial plan in a reasonably well managed company?

Which of the following is an indirect planning assumption?

A firm is planning to increase its inventory turnover by 1.5 turns next year. This year's inventory is $40M on revenues of $850M. Revenues are planned to grow at 10% next year. The firm's cost ratio (COGS as a percent of sales) is 40%, and is not expected to change in the near future. Calculate the inventory figure that should be included in next year's plan. Calculate using the cost of goods sold (COGS) formulation of inventory turnover and using year-end balances only.

Business plans and the information they contain are generally very private, and are not shared with investors or securities analysts.

Management wishes to reduce next year's external funding needs. Which of the following will accomplish this task?

The dividend payout ratio is defined as the ratio of net income minus retained earnings to net income.

____ increases the risk in financial planning.

Top-down planning tends to reflect more excessive and aggressive optimism than bottom-up planning.

Key Graphics expects to finish the current year with the financial results indicated on the worksheet given below. Develop next year's income statement and ending balance sheet using that information and the following planning assumptions and facts. Note that due to an economic slowdown, Key Graphics is expecting a ten percent reduction in revenue. It is attempting to cut expenditures by an even greater percentage, resulting in a larger net profit. Work to the nearest thousand dollars. PLANNING ASSUMPTIONS AND FACTS Income Statement Items

A good business plan conveys a comprehensive image of the firm's future including information about products, markets, employees, technology, facilities, capital, revenue, profitability, and anything else that might be relevant.

Business planning that focuses on short-term financial performance, including cash requirements is called:

Considering each action independently and holding other things constant, which of the following would DECREASE new debt financing needed?

If a firm does not pay dividends, what is true about the components of the sustainable growth rate?

The cash budget measures both the timing and amount of a firm's cash flows.

The managerial value of planning includes:

Which of the following is true of the financial plan in a reasonably well managed company?

Every financial planning problem ends with forecasting future income statement, balance sheet, and statement of cash flows.