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Commerce and BusinessbackBusinessbackCorporate Finance/Financial ManagementbackFundamentals of Corporate FinancebackPractice Set 2492back

Long-term Financial Planning And Growth

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Question 1
Free
Multiple Choice

Phil is working on a financial plan for the next three years.This time period is referred to as which one of the following?

Choose correct answer/s
A

financial range

B

planning horizon

C

planning agenda

D

short-run

E

current financing period

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Question 2
Free
Multiple Choice

Atlas Industries combines the smaller investment proposals from each operational unit into a single project for planning purposes.This process is referred to as which one of the following?

Choose correct answer/s
A

conjoining

B

aggregation

C

conglomeration

D

appropriation

E

summation

Check answer
Question 3
Free
Multiple Choice

Which one of the following terms is applied to the financial planning method which uses the projected sales level as the basis for determining changes in balance sheet and income statement account values?

Choose correct answer/s
A

percentage of sales method

B

sales dilution method

C

sales reconciliation method

D

common-size method

E

trend method

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Question 4
Free
Multiple Choice

Which one of the following terms is defined as dividends paid expressed as a percentage of net income?

Choose correct answer/s
A

dividend retention ratio

B

dividend yield

C

dividend payout ratio

D

dividend portion

E

dividend section

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Question 5
Free
Multiple Choice

Which one of the following correctly defines the retention ratio?

Choose correct answer/s
A

one plus the dividend payout ratio

B

addition to retained earnings divided by net income

C

addition to retained earnings divided by dividends paid

D

net income minus additions to retained earnings

E

net income minus cash dividends

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Question 6
Multiple Choice

Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?

Choose correct answer/s
A
current ratio
B
equity multiplier
C
retention ratio
D
capital intensity ratio
E
payout ratio
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Question 7
Multiple Choice

The internal growth rate of a firm is best described as the:

Choose correct answer/s
A
minimum growth rate achievable assuming a 100 percent retention ratio.
B
minimum growth rate achievable if the firm maintains a constant equity multiplier.
C
maximum growth rate achievable excluding external financing of any kind.
D
maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
E
maximum growth rate achievable with unlimited debt financing.
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Question 8
Multiple Choice

The sustainable growth rate of a firm is best described as the:

Choose correct answer/s
A
minimum growth rate achievable assuming a 100 percent retention ratio.
B
minimum growth rate achievable if the firm maintains a constant equity multiplier.
C
maximum growth rate achievable excluding external financing of any kind.
D
maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
E
maximum growth rate achievable with unlimited debt financing.
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Question 9
Multiple Choice

You are developing a financial plan for a corporation.Which of the following questions will be considered as you develop this plan?
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?

Choose correct answer/s
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
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Question 10
Multiple Choice

Financial planning:

Choose correct answer/s
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 for the next two to five years.
E
provides minimal benefits for firms that are highly responsive to economic changes.
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Question 11
Multiple Choice

Financial planning accomplishes which of the following for a firm?
I)determination of asset requirements
II)development of plans to contend with unexpected events
III)establishment of priorities
IV)analysis of funding options

Choose correct answer/s
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
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Question 12
Multiple Choice

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?

Choose correct answer/s
A
I, II, and III only
B
I, II, and IV only
C
I, III, and IV only
D
II, III, and IV only
E
I, II, III, and IV
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Question 13
Multiple Choice

Which one of the following statements concerning financial planning for a firm is correct?

Choose correct answer/s
A
Financial planning for fixed assets is done on a segregated basis within each division.
B
Financial plans often contain alternative options based on economic developments.
C
Financial plans frequently contain conflicting goals.
D
Financial plans assume that firms obtain no additional external financing.
E
The financial planning process is based on a single set of economic assumptions.
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Question 14
Multiple Choice

You are getting ready to prepare pro forma statements for your business.Which one of the following are you most apt to estimate first as you begin this process?

Choose correct answer/s
A
fixed assets
B
current expenses
C
sales forecast
D
projected net income
E
external financing need
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Question 15
Multiple Choice

Which one of the following statements is correct?

Choose correct answer/s
A
Pro forma statements must assume that no new equity is issued.
B
Pro forma statements are projections, not guarantees.
C
Pro forma statements are limited to a balance sheet and income statement.
D
Pro forma financial statements must assume that no dividends will be paid.
E
Net working capital needs are excluded from pro forma computations.
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Question 16
Multiple Choice

When utilizing the percentage of sales approach,managers:
I)estimate company sales based on a desired level of net income and the current profit margin.
II)consider only those assets that vary directly with sales.
III)consider the current production capacity level.
IV)can project both net income and net cash flows.

Choose correct answer/s
A
I and II only
B
II and III only
C
III and IV only
D
I, III, and IV only
E
II, III, and IV only
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Question 17
Multiple Choice

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

Choose correct answer/s
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 plus dividends paid.
D
Long-term debt varies directly with sales when a firm is currently operating at maximum capacity.
E
Inventory changes are directly proportional to sales changes.
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Question 18
Multiple Choice

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

Choose correct answer/s
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.
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Question 19
Multiple Choice

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 that the firm:

Choose correct answer/s
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.
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Question 20
Multiple Choice

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:

Choose correct answer/s
A
accounts payable.
B
long-term debt.
C
fixed assets.
D
retained earnings.
E
common stock.
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