Question 1

What is the addition to retained earnings if Stansfield grows at the internal growth rate? (Assume the dividend payout ratio is fixed.)

Accepted Answer

A)  $5.8 million 
B)  $13.3 million 
C)  $23.3 million 
D)  $24.9 million 
E)  $33.0 million

Question 2

Jasper Companies has a capital intensity ratio of.8 at full capacity. Currently, total assets are $76,900 and current sales are $88,800. At what level of capacity is the firm currently operating?

Accepted Answer

A)  78 % 
B)  83% 
C)  85% 
D)  88 % 
E)  92%

Question 3

Consider that you are a finance manager, and one of your junior staff wanted an explanation of the term debt capacity. 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 4

Calculate retention ratio given the following information: cash dividends paid = $6,000; sales = $100,000; cost of goods sold = $45,000; selling and administrative expenses = $25,000; interest expense = $6,000; tax rate = 30%.

Accepted Answer

A)  64.29% 
B)  68.23% 
C)  50% 
D)  31.77% 
E)  35.71%

Question 5

Consultants, Inc. is currently operating at 80 percent of capacity. What is the full-capacity level of sales?

Accepted Answer

A)  $3,040.00 
B)  $4,680.00 
C)  $4,750.00 
D)  $6,260.50 
E)  $7,312.50

Question 6

The following balance sheet and income statement should be used:   Hilltop, Inc. maintains a constant dividend payout ratio. The firm is currently operating at 78% capacity. What is the maximum rate at which the firm can grow without acquiring any additional external financing?

Accepted Answer

A)  3.75% 
B)  3.94% 
C)  5.08 % 
D)  5.25% 
E)  5.49%

Question 7

If we assume for forecasting purposes that the firm's fixed assets will increase directly with sales, we are effectively assuming that the firm:

Accepted Answer

A)  Has no unused capacity in its fixed assets. 
B)  Is currently utilizing its current assets at 100%. 
C)  Is producing more goods than it sells. 
D)  Has no excess working capital. 
E)  Can increase production without any external financing needed.

Question 8

Calculate the internal growth rate given the following information: total assets $600,000; net income $130,000; dividends paid $40,000.

Accepted Answer

A)  15.45% 
B)  16.55% 
C)  17.65% 
D)  18.75% 
E)  19.85%

Question 9

A firm currently has sales of $550,000, a 6% profit margin and a 40% dividend payout ratio. What is the anticipated amount of dividends to be paid to shareholders if sales are expected to increase by 5%?

Accepted Answer

A)  $13,200 
B)  $13,860 
C)  $34,650 
D)  $220,000 
E)  $231,000

Question 10

If the Ballard Institute currently operates at full capacity, then fixed assets would most likely vary directly with sales.

Accepted Answer

A) True 
 B)False

Question 11

The following balance sheet and income statement should be used:   All costs and net working capital vary directly with sales. Sales are projected to increase by 12%. What is the projected increase in accounts payable?

Accepted Answer

A)  $330 
B)  $370 
C)  $410 
D)  $780 
E)  $810

Question 12

A Toronto firm wants to maintain a growth rate of 8% without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of.5, a total asset turnover ratio of.83, and a profit margin of 8 percent. What must the retention ratio be?

Accepted Answer

A)  71.8 % 
B)  72.7 % 
C)  74.4% 
D)  75.1 % 
E)  76.3%

Question 13

How would you respond to a business owner who says, "I see no need in putting together a financial plan for the future. All of the numbers in the plan are just guesses anyway, no one knows what will happen for sure. I have a good idea what sales will be and beyond that, if sales are good, who needs a plan?"

Accepted Answer

The answer of How would you respond to a business...

Question 14

If a firm is operating at full capacity, the firm is:

Accepted Answer

A)  Generating the maximum level of sales given the current level of inventory. 
B)  Operating 24 hours a day. 
C)  Operating at the highest possible debt-equity ratio. 
D)  Generating the maximum amount of sales given the available level of cash. 
E)  Producing the maximum level of sales given the current level of fixed assets.

Question 15

Consultants, Inc. is currently operating at full capacity. The profit margin and the dividend payout ratio are constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 5%. What is the external financing needed?

Accepted Answer

A)  -$293.78 
B)  -$193.78 
C)  $122.50 
D)  $292.50 
E)  $367.27

Question 16

Given the following information, calculate sales value. Total asset turnover 0.80; total liabilities $5,000; total equity $5,000.

Accepted Answer

A)  $8,600 
B)  $8,000 
C)  $10,600 
D)  $11,600 
E)  $12,600

Question 17

What is Marble's earnings retention ratio for 2018?

Accepted Answer

A)  0.37 
B)  0.49 
C)  0.63 
D)  0.89 
E)  0.92

Question 18

The firm's investment and financing decisions are unrelated and should not be analyzed at the same time.

Accepted Answer

A) True 
 B)False

Question 19

Provide five advantages that planning can achieve.

Accepted Answer

The answer of Provide five advantages that planning can achieve....

Question 20

By developing a financial plan, a firm benefits by being forced to set goals and establish priorities.

Accepted Answer

A) True 
 B)False

Exam 4: Long-Term Financial Planning and Corporate Growth

What is the addition to retained earnings if Stansfield grows at the internal growth rate? (Assume the dividend payout ratio is fixed.)

Jasper Companies has a capital intensity ratio of.8 at full capacity. Currently, total assets are $76,900 and current sales are $88,800. At what level of capacity is the firm currently operating?

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

Calculate retention ratio given the following information: cash dividends paid = $6,000; sales = $100,000; cost of goods sold = $45,000; selling and administrative expenses = $25,000; interest expense = $6,000; tax rate = 30%.

Consultants, Inc. is currently operating at 80 percent of capacity. What is the full-capacity level of sales?

The following balance sheet and income statement should be used: Hilltop, Inc. maintains a constant dividend payout ratio. The firm is currently operating at 78% capacity. What is the maximum rate at which the firm can grow without acquiring any additional external financing?

If we assume for forecasting purposes that the firm's fixed assets will increase directly with sales, we are effectively assuming that the firm:

Calculate the internal growth rate given the following information: total assets $600,000; net income $130,000; dividends paid $40,000.

A firm currently has sales of $550,000, a 6% profit margin and a 40% dividend payout ratio. What is the anticipated amount of dividends to be paid to shareholders if sales are expected to increase by 5%?

If the Ballard Institute currently operates at full capacity, then fixed assets would most likely vary directly with sales.

The following balance sheet and income statement should be used: All costs and net working capital vary directly with sales. Sales are projected to increase by 12%. What is the projected increase in accounts payable?

A Toronto firm wants to maintain a growth rate of 8% without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of.5, a total asset turnover ratio of.83, and a profit margin of 8 percent. What must the retention ratio be?

If a firm is operating at full capacity, the firm is:

Consultants, Inc. is currently operating at full capacity. The profit margin and the dividend payout ratio are constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 5%. What is the external financing needed?

Given the following information, calculate sales value. Total asset turnover 0.80; total liabilities $5,000; total equity $5,000.

What is Marble's earnings retention ratio for 2018?

The firm's investment and financing decisions are unrelated and should not be analyzed at the same time.

Provide five advantages that planning can achieve.

By developing a financial plan, a firm benefits by being forced to set goals and establish priorities.