Question 1

Roy and Flo's Flowers has $1,300 of sales and $1,755 of total assets. The firm is operating at 80 percent of capacity. What is the capital intensity ratio at full capacity?

Accepted Answer

A)  .59 
B)  .93 
C)  1.08 
D)  1.43 
E)  1.69

Question 2

Increasing all accounts by a fixed percentage may not be the best financial planning model because:

Accepted Answer

A)  The debt-equity ratio would vary. 
B)  Not all accounts vary directly with sales. 
C)  The model is difficult to use. 
D)  The growth percentage is difficult to predict. 
E)  The retention ratio must be held constant.

Question 3

The factors are incorporated in the financial planning process?

Accepted Answer

The answer of The factors are incorporated in the financial...

Question 4

A Victoria firm currently has $1,800 in sales and is operating at 60 percent of the firm's capacity. What is the full capacity level of sales?

Accepted Answer

A)  $720 
B)  $1,080 
C)  $2,880 
D)  $3,000 
E)  $4,500

Question 5

If total assets increase by the same percentage as sales increase it is likely assets and sales will increase by identical dollar amounts.

Accepted Answer

A) True 
 B)False

Question 6

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)  $2,250,000

Question 7

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)  $1,800

Question 8

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

Accepted Answer

The answer of Consider that you are a finance manager,...

Question 9

Why is it important for managers to understand the importance of both the internal and the sustainable rates of growth?

Accepted Answer

The answer of Why is it important for managers to...

Question 10

Suppose a firm calculates its EFN and finds that it is negative. What are the firm's options in this case?

Accepted Answer

The answer of Suppose a firm calculates its EFN and...

Question 11

By compiling pro forma statements, firms can:

Accepted Answer

A)  Ensure that their anticipated rate of growth will in fact occur. 
B)  Avoid increasing their level of financial leverage while still increasing the growth rate of the firm. 
C)  See the projected effects of their planned activities. 
D)  Determine how to grow at a rate that exceeds their sustainable rate of growth without increasing their equity financing. 
E)  Reduce the daily level of management involvement in the operations of the firm.

Question 12

Assume Stansfield Corporation is utilizing its fixed assets at 90% capacity. Assume costs, current liabilities, and current assets vary directly with sales, and that the dividend payout ratio remains unchanged. If sales increase by 20%, what will total fixed assets be?

Accepted Answer

A)  $256 million 
B)  $286 million 
C)  $313 million 
D)  $359 million 
E)  $470 million

Question 13

Assets, accounts payable and costs are proportional to sales. Debt and equity are not.
The sales of Douglass Enterprises are expected to increase by 14% next year. The firm is currently producing at full capacity. Management wants to maintain a constant debt-equity ratio and a constant dividend payout ratio. What is the external financing need?

Accepted Answer

A)  -$325 
B)  -$238 
C)  $542 
D)  $562 
E)  $962

Question 14

What four elements are incorporated in financial planning?

Accepted Answer

The answer of What four elements are incorporated in financial...

Question 15

All else the same, sustainable growth will decrease with increases in _____________.

Accepted Answer

A)  Earnings retention. 
B)  Net income. 
C)  Total asset turnover. 
D)  Profit margin. 
E)  Total equity.

Question 16

A firm has an ROE of 7.5% and an ROA of 13.5%. What is the internal growth rate if the firm has a 40% dividend payout ratio?

Accepted Answer

A)  4.71% 
B)  5.71% 
C)  8.10% 
D)  8.81% 
E)  9.19%

Question 17

Which of the following is a factor in calculating sustainable growth?

Accepted Answer

A)  Current ratio 
B)  Profit margin 
C)  Inventory turnover 
D)  Cash ratio 
E)  Cash coverage ratio

Question 18

You wish to compute a firm's sustainable growth rate from its accounting statements. To do so, you could use the values of:

Accepted Answer

A)  Total assets, net income, and the retention ratio. 
B)  Total assets, interest paid, and equity. 
C)  Net income, equity, and the dividend payout ratio. 
D)  Interest paid, equity, and total assets. 
E)  Net income, equity, and total assets.

Question 19

The sustainable growth rate excludes any kind of external financing.

Accepted Answer