Deck 4: Long-Term Financial Planning and Growth

Question 1

The retention ratio can be computed as:

A) 1 − Plowback ratio.
B) Change in retained earnings/Cash dividends.
C) 1 + Dividend payout ratio.
D) (Change in retained earnings + Cash dividends)/Net income.
E) 1 − (Cash dividends/Net income).

Answer 1

1 − (Cash dividends/Net income).

Question 2

Which of the following questions are appropriate to address during the financial planning process?
I. Should the firm merge with a competitor?
II. Should additional shares of stock be sold?
III. Should a particular division be sold?
IV. Should a new product be introduced?

A) I only
B) II and III only
C) I and II only
D) I, II, and III only
E) I, II, III, and IV

Answer 2

I, II, III, and IV

Question 3

Financial planning includes the:
I. determination of asset requirements.
II. development of contingency plans.
III. establishment of priorities.
IV. analysis of funding options.

A) I and III only
B) II and IV only
C) I, III, and IV only
D) I, II, and III only
E) I, II, III, and IV

Answer 3

I, II, III, and IV

Question 4

When developing a financial plan for a corporation you should consider which of the following?
I. How much net working capital will be needed?
II. Will additional fixed assets be required?
III. Will dividends be paid to shareholders?
IV. How much new debt must be obtained?

A) I and IV only
B) II and III only
C) I, III, and IV only
D) II, III, and IV only
E) I, II, III, and IV

Question 5

When compiling a pro forma statement, which policy most directly affects the projection of the retained earnings account balance?

A) Net working capital policy
B) Capital structure policy
C) Dividend policy
D) Capital budgeting policy
E) Capacity utilization policy

Question 6

When utilizing the percentage of sales approach, managers:

A) estimate company sales based on a desired level of net income and the current profit margin.
B) consider only those assets that vary directly with sales.
C) consider the current production capacity level.
D) can project net income but not net cash flows.
E) assume all liability accounts will remain constant.

Question 7

Which one of the following is correct in relation to pro forma statements?

A) Fixed assets must increase if sales are projected to increase.
B) Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity.
C) The addition to retained earnings is equal to net income less cash dividends.
D) Long-term debt varies directly with sales when a firm is currently operating at maximum capacity.
E) Inventory changes are not proportional to sales changes.

Question 8

The portion of net income that a firm reinvests in itself is called the:

A) retention ratio.
B) dividend yield.
C) dividend payout ratio.
D) internal growth rate.
E) cash influx ratio.

Question 9

Which ratio identifies the amount of total assets a firm needs in order to generate $1 in sales?

A) Return on assets
B) Equity multiplier
C) Retention ratio
D) Capital intensity ratio
E) Current ratio

Question 10

Financial planning:

A) focuses solely on the short-term outlook for a firm.
B) is a process that firms employ only when major changes to a firm's operations are anticipated.
C) is a process that firms undergo once every five years.
D) considers multiple options and scenarios.
E) provides minimal benefits for firms that are highly responsive to economic changes.

Question 11

Atlas Industries combines the investment proposals from each operational unit into one single project for planning purposes. This process is referred to as:

A) conjoining.
B) aggregation.
C) conglomeration.
D) appropriation.
E) summation.

Question 12

When constructing a pro forma statement, net working capital generally:

A) remains fixed.
B) varies only if the firm is currently producing at full capacity.
C) varies only if the firm maintains a fixed debt-equity ratio.
D) varies only if the firm is producing at less than full capacity.
E) varies proportionally with sales.

Question 13

Which one of the following are you most apt to estimate first as you begin the process of preparing pro forma statements?

A) Need for additional fixed assets
B) Current fixed costs
C) Projected sales
D) Desired net income
E) Desired dividend payments

Question 14

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. If the firm has a positive external financing need, that need will be met by:

A) accounts payable.
B) long-term debt.
C) fixed assets.
D) retained earnings.
E) common stock.

Question 15

When planning for the long run, the planning horizon is usually a period of:

A) 5 to 10 years.
B) 2 to 5 years.
C) 1 to 3 years.
D) 3 to 7 years.
E) 5 years or more.

Question 16

Financial plans:

A) concentrate solely on income and expense items.
B) often contain alternative options based on economic developments.
C) frequently contain conflicting goals.
D) assume that firms obtain no additional external financing.
E) are based on a single set of economic assumptions.

Question 17

The financial planning method that uses the projected sales level as the basis for determining changes in balance sheet and income statement account values is referred to as the ________ method.

A) percentage of sales
B) sales dilution
C) sales reconciliation
D) common-size
E) trend

Question 18

Pro forma statements:

A) must assume that no new equity is issued.
B) are projections, not guarantees.
C) are limited to a balance sheet and income statement.
D) must assume that no dividends will be paid.
E) exclude net working capital needs.

Question 19

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels. Given this, you can safely assume the firm:

A) is projected to grow at the internal rate of growth.
B) is projected to grow at the sustainable rate of growth.
C) currently has excess capacity.
D) is currently operating at full capacity.
E) retains all of its net income.

Question 20

Next year's pro forma statement is based on an annual increase in sales of four percent. The firm is currently operating at 85 percent of capacity. Net working capital and all costs vary directly with sales. The tax rate and the dividend payout ratio are fixed. Given this information, the:

A) projected dividends must equal the current dividends.
B) depreciation expense will decrease by four percent.
C) retained earnings will increase by 85 percent of projected net income.
D) total assets will increase by less than four percent.
E) total liabilities and owners' equity will increase by four percent.

Question 21

A firm's external financing need is met by:

A) retained earnings.
B) net working capital and retained earnings.
C) net income and retained earnings.
D) debt or equity.
E) owners' equity, including retained earnings.

Question 22

The financial planning process is least apt to:

A) involve internal negotiations among divisions.
B) quantify senior manager's goals.
C) consider the development of future technologies.
D) reconcile a company's activities across divisions
E) consider factors that currently provide a negative rate of growth.

Question 23

Financial plans generally tend to ignore:

A) dividend policy.
B) manager's goals and objectives.
C) risks associated with cash flows.
D) operating capacity levels.
E) capital structure policy.

Question 24

The external financing need:

A) will limit growth if unfunded.
B) is unaffected by the dividend payout ratio.
C) must be funded by long-term debt.
D) ignores any changes in retained earnings.
E) considers only the required increase in fixed assets.

Question 25

Buster's Market earns a profit and has a dividend payout ratio of 30 percent. The firm does not want to issue additional equity shares nor increase its long-term debt at this time. Which one of the following defines the maximum rate at which this firm can currently grow?

A) Internal growth rate (1 − .30)
B) Sustainable growth rate (1 − .30)
C) Internal growth rate
D) Sustainable growth rate
E) Zero percent

Question 26

The maximum rate of growth a corporation can achieve can be increased by:

A) avoiding new external equity financing.
B) increasing the corporate tax rate.
C) increasing the retention ratio.
D) increasing the dividend payout ratio.
E) increasing the sales forecast.

Question 27

Martin Aerospace is currently operating at full capacity based on its current level of assets. Sales are expected to increase by 4.5 percent next year, which is the firm's internal rate of growth. Net working capital and operating costs are expected to increase directly with sales. The interest expense will remain constant at its current level. The tax rate and the dividend payout ratio will be held constant. Current and projected net income is positive. Which one of the following statements is correct regarding the pro forma statement for next year?

A) The pro forma profit margin is equal to the current profit margin.
B) Retained earnings will increase at the same rate as sales.
C) Total assets will increase at the same rate as sales.
D) Long-term debt will increase in direct relation to sales.
E) Owners' equity will remain constant.

Question 28

Which capital intensity ratio indicates the smallest need for fixed assets per dollar of sales?

A) 0.07
B) 0.86
C) 0.39
D) 1.00
E) 1.15

Question 29

A firm is operating at 90 percent of capacity. This information is primarily needed to project which one of the following account values when compiling pro forma statements?

A) Sales
B) Cost of goods sold
C) Accounts receivable
D) Fixed assets
E) Long-term debt

Question 30

BJ Company's net working capital and all of its expenses vary directly with sales. The firm is currently operating at 86 percent of capacity. The firm wants no additional external financing of any kind. The tax rate is 21 percent and the dividend payout ratio is fixed at 25 percent. Which statement related to next year's pro forma statements must be correct?

A) Total equity will remain constant at this year's ending value.
B) The maximum rate of sales increase is four percent.
C) The firm cannot exceed its internal rate of growth.
D) Accounts payable will increase at the same rate as fixed assets.
E) Inventory will remain constant at the current level.

Question 31

The internal growth rate of a firm is best described as the ________ growth rate achievable ________.

A) minimum; assuming a retention ratio of 100 percent
B) minimum; if the firm maintains a constant equity multiplier
C) maximum; excluding external financing of any kind
D) maximum; excluding any external equity financing while maintaining a constant debt-equity ratio
E) maximum; with unlimited debt financing

Question 32

Which one of these is a requirement if the sustainable growth rate is to exceed the internal growth rate?

A) Net working capital > $0
B) Total debt > $0
C) Dividend ratio = 0
D) Retention ratio = 0
E) Sales > Total assets

Question 33

All else constant, a(n) ________ will increase the internal rate of growth.

A) decrease in the retention ratio
B) decrease in net income
C) increase in the dividend payout ratio
D) decrease in total assets
E) increase in cost of goods sold

Question 34

Which one of the following has the least effect on a firm's sustainable rate of growth?

A) Capital intensity ratio
B) Profit margin
C) Dividend policy
D) Debt-equity ratio
E) Quick ratio

Question 35

The plowback ratio is:

A) equal to net income divided by the change in total equity.
B) the percentage of net income available to the firm to fund future growth.
C) equal to one minus the retention ratio.
D) the change in retained earnings divided by the dividends paid.
E) the dollar increase in net income divided by the dollar increase in sales.

Question 36

If a firm equates its pro forma sales growth to the rate of sustainable growth, and has positive net income and excess capacity, then the:

A) maximum capacity level will have to increase at the same rate as sales growth.
B) total assets will have to increase at the same rate as sales growth.
C) debt-equity ratio will increase.
D) retained earnings will increase.
E) number of common shares outstanding will increase

Question 37

Worthington Industries is currently operating at full-capacity sales. Thus, sales are currently being limited by the firm's:

A) net working capital.
B) long-term debt.
C) inventory.
D) fixed assets.
E) debt-equity ratio.

Question 38

Wood Products is operating at 87 percent capacity and earning a substantial profit. A sales increase is least apt to increase the firm's:

A) accounts receivable.
B) cost of goods sold.
C) accounts payable.
D) fixed assets.
E) inventory.

Question 39

The sustainable growth rate of a firm is best described as the ________ growth rate achievable ________.

A) minimum; assuming a 100 percent retention ratio
B) minimum; if the firm maintains a constant equity multiplier
C) maximum; excluding external financing of any kind
D) maximum; excluding any external equity financing while maintaining a constant debt-equity ratio
E) maximum; with unlimited debt financing

Question 40

The financial planning process tends to place the least emphasis on a firm's:

A) growth limitations.
B) capacity utilization.
C) market value.
D) capital structure.
E) dividend policy.

Question 41

Ed's Market is operating at full capacity with a sales level of $547,200 and fixed assets of $471,000. The profit margin is 5.4 percent. What is the required addition to fixed assets if sales are to increase by 4 percent?

A) $10,709
B) $14,680
C) $22,400
D) $16,760
E) $18,840

Question 42

Urban's, which is currently operating at full capacity, has sales of $47,000, current assets of $5,100, current liabilities of $6,200, net fixed assets of $51,500, and a profit margin of 5 percent. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 3 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?

A) −$908.50
B) −$722.50
C) $967.30
D) $1,698.00
E) $1,512.00

Question 43

Dexter's has annual sales of $53,800, current assets of $18,900, and net working capital of $2,800. Assume this firm is operating at full capacity and that all costs, net working capital, and fixed assets vary directly with sales. The debt-equity ratio and the dividend payout ratio are constant. What is the pro forma current liabilities value for next year if sales are projected to increase by 7.5 percent?

A) $13,650
B) $17,308
C) $19,121
D) $14,248
E) $16,810

Question 44

Baked at Home Cookies expects sales of $672,500 next year. The profit margin is 4.6 percent and the firm has a dividend payout ratio of 15 percent. What is the projected increase in retained earnings?

A) $26,294.75
B) $17,500.50
C) $4,640.25
D) $20,640.25
E) $30,935.00

Question 45

Wood Refinishers currently has $298,900 in sales and is operating at 86 percent of the firm's capacity. The dividend payout ratio is 40 percent and cost of goods sold is $211,300. What is the full capacity level of sales?

A) $245,697.67
B) $208,534.88
C) $347,558.14
D) $211,300.00
E) $254,500.00

Question 46

The Outlet has a capital intensity ratio of .87 at full capacity. Currently, total assets are $48,900 and current sales are $53,600. At what level of capacity is the firm currently operating?

A) 87.00 percent
B) 91.67 percent
C) 95.36 percent
D) 96.08 percent
E) 98.21 percent

Question 47

Assume a firm is currently operating at 98 percent of capacity with sales of $28,400. Next year, sales are projected to increase to $35,000. What is the projected addition to fixed assets if the firm currently has fixed assets of $16,900 and total assets of $24,600?

A) $0
B) $3,511
C) $2,629
D) $580
E) $1,688

Question 48

A Procrustes approach to financial planning is based on:

A) a policy of producing a financial plan once every five years.
B) developing a plan around the goals of senior managers.
C) a proactive approach to the economic outlook.
D) a flexible capital budget.
E) a flexible capital structure.

Question 49

Rural Markets has $878,000 of sales and $913,000 of total assets. The firm is operating at 93 percent of capacity. What is the capital intensity ratio at full capacity?

A) 0.62
B) 0.88
C) 0.97
D) 1.03
E) 1.14

Question 50

The Broom Maker currently has annual sales of $387,000 and is operating at 88 percent of capacity. The profit margin of 5.5 percent and the dividend payout ratio of 30 percent are projected to remain constant. What is the projected addition to retained earnings for next year based on a sales growth rate of 4.8 percent?

A) $12,309
B) $15,615
C) $7,890
D) $6,692
E) $714

Question 51

Hench's has annual sales of $56,900 is currently operating at 86 percent of capacity. What is the full-capacity level of sales?

A) $48,934
B) $47,740
C) $66,163
D) $105,834
E) $64,866

Question 52

Marco's has current annual sales of $52,600, net fixed assets of $38,900, and total assets of $56,300. The firm is currently operating at 79 percent of capacity. What is the capital intensity ratio at full capacity?

A) 1.18
B) 1.10
C) 0.96
D) 0.91
E) 0.85

Question 53

Black Top Express has $1,320 of cash, inventory of $10,200, net fixed assets of $33,600, accounts payable of $3,650, accounts receivable of $3,780, and long-term debt of $18,100. All costs, net working capital, and fixed assets vary directly with sales. Sales are projected to increase by 4.8 percent annually. What is the pro forma net working capital for next year?

A) $15,988
B) $16,684
C) $12,209
D) $17,878
E) $11,800

Question 54

The Corner Store has sales of $68,900, dividends of $1,960, and net income of $4,900. The firm is expecting sales to decrease by 3 percent next year while the profit margin remains constant. The firm wants to increase the dividend payout ratio by a fixed 2.5 percent. What is the projected increase in retained earnings for next year?

A) $1,711
B) $1,867
C) $2,733
D) $1,969
E) $3,438

Question 55

Muder's Market has sales of $28,400, net income of $2,250, and a retention ratio of 60 percent. Assume the profit margin and the payout ratio are constant and sales increase by 6 percent. What is the pro forma retained earnings if the current retained earnings balance is $4,100?

A) $5,450
B) $5,721
C) $5,531
D) $5,648
E) $5,028

Question 56

Fresno Salads has current sales of $6,000 and a profit margin of 6.5 percent. The firm estimates that sales will increase by 4 percent next year and that all costs will vary in direct relationship to sales. What is the pro forma net income?

A) $303.33
B) $327.18
C) $405.60
D) $438.70
E) $441.10

Question 57

M&M Tools is currently operating at 88 percent of capacity. All costs and net working capital vary directly with sales. What is the amount of the pro forma net fixed assets for next year if sales are projected to increase by 13 percent and the firm currently has $33,600 of net fixed assets?

A) $33,600
B) $33,412
C) $38,101
D) $37,968
E) $42,148

Question 58

Miller's Hardware has current sales of $42,700, EBIT of $9,700, net income of $6,600, interest expense of $1,360, and dividends paid of $1,925. Assume the profit margin, debt-equity ratio, and dividend payout ratio are held constant. Sales are expected to increase by $8,000 next year. What is the projected change to retained earnings for next year?

A) $5,575
B) $4,994
C) $4,909
D) $5,551
E) $5,386

Question 59

The Mill Press is operating at 94 percent of its fixed asset capacity and has current sales of $611,000. How much can the firm grow before any new fixed assets are needed?

A) 4.99 percent
B) 5.78 percent
C) 6.02 percent
D) 6.38 percent
E) 6.79 percent

Question 60

The Steel Mill is currently operating at 84 percent of capacity. Annual sales are $28,400 and net income is $2,250. The firm has current liabilities of $2,700, long-term debt of $9,800, net fixed assets of $16,900, net working capital of $5,000, and owners' equity of $12,100. All costs and net working capital vary directly with sales. The tax rate and profit margin will remain constant. The dividend payout ratio is constant at 40 percent. How much additional debt is required if no new equity is raised and sales are projected to increase by 12 percent?

A) −$810
B) −$912
C) −$642
D) $264
E) $358

Question 61

BK Metals is currently operating at full capacity. The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. The company currently has current liabilities of $3,950, long-term debt of $14,700, net working capital of $7,850, net fixed assets of $27,600, owners' equity of $20,750, net income of $2,900, and dividends paid of $870. What is the external financing need if sales increase by 11 percent?

A) $896
B) $1,646
C) $972
D) −$145
E) −$768

Question 62

LL Companies has sales of $9,800, net income of $1,060, total assets of $8,950, and total debt of $4,760. Assets and costs are proportional to sales. Debt and equity are not. A dividend of $371 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $10,584. What is the amount of the external financing need?

A) $716
B) $1,333
C) −$1,574
D) −$382
E) −$28

Question 63

A firm has a retention ratio of 45 percent and a sustainable growth rate of 6.2 percent. The capital intensity ratio is 1.2 and the debt-equity ratio is .64. What is the profit margin?

A) 6.28 percent
B) 7.67 percent
C) 9.49 percent
D) 12.38 percent
E) 14.63 percent

Question 64

Nu Tek has sales of $19,700, net income of $3,517, fixed assets of $18,282, current liabilities of $2,940, current assets of $3,018, long-term debt of $7,600, and equity of $10,760. Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 50 percent dividend payout ratio. Next year's sales are projected to increase by 7 percent. What is the amount of external financing needed if the firm is currently operating at full capacity?

A) −$596
B) −$141
C) $583
D) $912
E) −$482

Question 65

Cross Town Express has sales of $137,000, net income of $14,000, total assets of $98,000, and total equity of $45,000. The firm paid $7,560 in dividends and maintains a constant dividend payout ratio. Currently, the firm is operating at full capacity. All costs and assets vary directly with sales. The firm does not want to obtain any additional external equity. At the sustainable rate of growth, how much new total debt must the firm acquire?

A) $0
B) $6,311
C) $6,989
D) $7,207
E) $8,852

Question 66

Wilson's is currently operating at maximum capacity. The firm has a net income of $2,250, total assets of $24,600, long-term debt of $9,800, accounts payable of $2,700, dividends of $900, and total equity of $12,100. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 5 percent?

A) −$323
B) −$467
C) $0
D) $108
E) $367

Question 67

Porter's Corner has sales of $4,650 net income of $490, total assets of $5,820, and total debt of $2,760. Assets and costs are proportional to sales. Debt and equity are not. No dividends or taxes are paid. Next year's sales are projected to be $5,487. What is the amount of the external financing needed?

A) −$28
B) $469
C) $611
D) $1,048
E) $823

Question 68

The Atlantic Co. is an all-equity company with sales of $21,600, costs of $14,780, depreciation of $2,000, and taxes of $1,012. The dividend payout ratio is 12 percent. Sales are expected to increase by 22 percent next year. What is the pro forma addition to retained earnings assuming all costs vary proportionately with sales?

A) $4,899
B) $3,745
C) $3,892
D) $4,011
E) $4,088

Question 69

Deep Hollow Mills has sales of $254,600 and a profit margin of 5.2 percent. The firm has retained earnings of $113,200 after paying its annual dividend of $7,500. What is the pro forma retained earnings for next year if this firm grows at a rate of 3.6 percent and both the profit margin and the dividend payout ratio remain constant?

A) $117,704.74
B) $123,771.10
C) $113,592.08
D) $105,921.22
E) $119,145.81

Question 70

The Dog House has net income of $3,450 and total equity of $8,600. The debt-equity ratio is .60 and the payout ratio is 30 percent. What is the internal growth rate?

A) 14.47 percent
B) 17.78 percent
C) 21.29 percent
D) 29.40 percent
E) 33.33 percent

Question 71

The Paper Mill is operating at full capacity. Assets, costs, and current liabilities vary directly with sales. The dividend payout ratio is constant. The firm has sales of $42,700, net income of $5,500, total assets of $48,900, current liabilities of $3,650, long-term debt of $18,100, owners' equity of $27,150, and dividends of $1,925. What is the external financing need if sales increase by 14 percent?

A) −$1,816
B) −$1,268
C) $1,031
D) $3,504
E) $2,260

Question 72

Bill's has a profit margin of 5 percent and a dividend payout ratio of 20 percent. The total asset turnover is 1.6 and the debt-equity ratio is .4. What is the sustainable rate of growth?

A) 11.20 percent
B) 9.60 percent
C) 10.89 percent
D) 9.26 percent
E) 9.84 percent

Question 73

The Two Sisters has a return on assets of 9 percent and a dividend payout ratio of 75 percent. What is the internal growth rate?

A) 3.24 percent
B) 4.05 percent
C) 3.97 percent
D) 2.30 percent
E) 2.25 percent

Question 74

Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of .55, a total asset turnover ratio of 1.30, and a profit margin of 9 percent. What must the dividend payout ratio be?

A) 26.26 percent
B) 38.87 percent
C) 49.29 percent
D) 61.13 percent
E) 73.74 percent

Question 75

Seaweed Mfg. is currently operating at only 84 percent of fixed asset capacity. Current sales are $550,000. What is the maximum rate at which sales can grow before any new fixed assets are needed?

A) 17.23 percent
B) 17.47 percent
C) 18.03 percent
D) 18.87 percent
E) 19.05 percent

Question 76

LM Products has total assets of $48,900, total debt of $21,750, long-term debt of $18,100, owners' equity of $27,150, dividends paid of $1,925, and net income of $5,500. Assume net working capital and all company costs increase directly with sales. Also assume the tax rate and the dividend payout ratio are constant and the company is currently operating at full capacity. What is the external financing need if sales increase by 4 percent?

A) −$1,908
B) −$804
C) −$397
D) $1,201
E) $1,344

Question 77

James Mfg. is currently operating at only 86 percent of fixed asset capacity. Fixed assets are $387,000. Current sales are $510,000 and are projected to grow to $664,000. What amount must be spent on new fixed assets to support this growth in sales?

A) $0
B) $22,654
C) $46,319
D) $79,408
E) $93,608

Question 78

Ausel's Cabinets has $27,600 in net fixed assets and is operating at 96 percent of capacity. Sales are $36,200 currently. What is the required increase in fixed assets if sales are projected to increase by 14 percent?

A) $4,205
B) $3,400
C) $6,833
D) $0
E) $2,605

Question 79

Robotics desires a sustainable growth rate of 12.7 percent while maintaining a constant dividend payout ratio of 25 percent and a profit margin of 12 percent. The company has a capital intensity ratio of .95. What equity multiplier is required to achieve the company's desired rate of growth?

A) 0.84
B) 0.98
C) 1.02
D) 1.19
E) 1.11

Question 80

Nielsen's has annual sales of $352,400 and a profit margin of 5.2 percent. The firm has beginning owners' equity of $136,400 and ending owners' equity of $139,900. The firm neither sold nor repurchased shares during the year. What is the firm's retention ratio?

A) 26.87 percent
B) 40.00 percent
C) 36.67 percent
D) 19.10 percent
E) 23.33 percent